News  Alam Maritim Resources Bhd (ALAM) announced that it had received two award letters from an established oil and gas company for: (i) the provision of 1 unit Anchor Handling Tug vessel for the primary period of 12 months with an optional period of 6 months; and (ii) 1 unit straight supply vessel for a period of 12 months with an optional period of another 12 months.

 The total value of the contracts is approximately RM37.0m (inclusive of the optional periods if exercised by the Client).

Comments  This is ALAM’s 12th contract announcement for 2013 and brings its YTD total contract wins to RM1.17b (surpassing the cumulative contract wins of RM528.7m in 2012).

 We believe the average daily charter rate (DCR) for the contract is c.RM1.80-1.90/bhp, which is decent for such vessels (we estimate one to be a 5000bhp vessel).

 We believe that ALAM's outlook has definitely improved and are heartened with its continuing wins.

 The continuing contract awards in the market also signify that there is potential for improvement in offshore support vessel market.

Outlook  ALAM is aiming to secure a total of RM2.5b contract sum in 2013. Expected OSV wins include those for: (i) ALAM’s wholly-owned OSVs (there are 6-7 vessel contracts up for expiry soon and ALAM has also taken delivery of two 12k bhp AHTS, which is likely to secure contracts within the next 1-2 months), (ii) its Inspection, Repair and Maintenance (IRM) segment; and (iii) third-party charters for accommodation barge or platform supply vessel contracts.

 For its OIC business, ALAM is looking to either secure a portion of the upcoming Pan Malaysian Transportation and Installation project (to be awarded within the year), or at least work on subcontract works for the main incumbents, i.e. SKPETRO (OP; TP: RM4.72).

 ALAM does not rule out asset acquisitions via joint-venture for the inspection, repair and maintenance segment (i.e. diving support vessels) to improve its chances for contract wins.

Forecast  We maintain our estimates for now given that we have already assumed at least 85% utilisation for its vessels in FY13.

Rating Maintain OUTPERFORM

Valuation  Our target price of RM1.91 is based on unchanged CY14 PER of 14x.

 Our ascribed PER is in line with the PER accorded to its competitor PERDANA (OP; RM2.40) and is justifiable given that it is still way below ALAM’s 2-year forward peak PER of 19.0x seen in 2007-2008.

Risks  (i) Lower than expected OSV utilisation  (ii) Further continuation of its sluggish underwater services division works.

Source: Kenanga