News     In two separate announcements, Alam Maritim Resources Bhd (ALAM) said that it had secured three (3) new separate charter contracts yesterday. 1) a 49%-owned accommodation vessel (small supply vessel) to Petronas Carigali for a period of 5+1 years worth RM61.32m;

2) a 100%-owned AHT type of PSV to an oil & gas services company for 270+135 days worth RM12.96m;

3) a 50%-owned pipelay barge type of work barge to an oil & gas service company for 104 days worth RM10.92m.

Comments     These are ALAM’s 8 and 9 contract announcements in 2013, bringing its YTD total contract wins to RM1.02b (surpassing the cumulative contract wins of RM528.7m in 2012).

The daily charter rate (DCR) for the Petronas Carigali contract is higher at RM28k/day from RM24k/day under a previous contract. The DCR for the RM12.96m-contract is estimated at RM32k/day (vs. RM25k previously) while the work barge contract is maintained at RM105k/day.

We are positive on the contract wins as they imply that ALAM is more than able to secure new/extension contracts with higher charter rates.

We understand that the average utilisation rate for its fleet is now at 80% from 75%-77% in 1Q13. This should improve further in the coming months.

Outlook      We understand that internally, ALAM is aiming to secure a total of RM2.5b contract sum this year. With nine contracts worth RM1.02b in hand, that means there should be another RM1.5b worth of contracts in the pipeline.

ALAM is expecting another similar type of contract like the Petronas Carigali one above by this month-end or early next month.

It has taken delivery of two 12k bhp AHTS recently and is aiming to secure contracts for these two new AHTS in another 1-2 months’ time.

There are 7-8 vessel contracts up for expiry soon. Given the buoyant demand for the OSV market, ALAM should be able to get the contract renewed with likely higher charter rates.

Forecast      We are keeping our forecasts for now pending an update from the company on its potential contract wins going forward.

Rating      Maintain OUTPERFORM

Valuation       Our TP is maintained at RM1.15/share, based on an unchanged CY13 PER of 12x.

Our ascribed PER is justifiable given that it is still way below ALAM’s 2-year forward peak PER of 19.0x seen in 2007-2008.

Risks      1) Lower than expected OSV utilisation and 2) a continuation of its sluggish underwater services division works.

Source: Kenanga