Alam Maritim (AMRB)’s 1QFY13 results whizzed past our and consensus estimates. More upside surprises are likely if the company secures more IRM and OIC contracts. We continue to like AMRB’s stable outlook and improving earnings visibility. Maintain BUY, but at a higher revised FV of MYR1.65 (from MYR1.25), pegged to 14x FY14 EPS (previously 13x FY13 EPS).

Above estimates. AMRB’s 1QFY13 earnings of MYR22.2m exceeded forecasts, making up 29.1% of our and 28.5% of consensus’ full-year estimates. Revenue across its three divisions of offshore supply vessel (OSV), offshore installation and construction (OIC) and subsea improved significantly, resulting in an overall 68.6% y-o-y revenue surge.

Recovering from 4QFY12. Compared to an operating loss of MYR3m in 4QFY12, the company incurred an operating profit of MYR17.5m during the quarter under review due to improving operating margins at its OSV business, supported by an increase in utilization as well as charter rates.

Positive earnings outlook. Moving forward, AMRB’s earnings are expected to be supported by its dominant OSV division, underpinned by steadier utilization rates and charter rates on top of its thriving third-party charter business. That being said, the company’s subsea division is no longer a liability, having secured a three-year contract from Talisman earlier this year. We also see further upside in its subsea division as we understand that other production-sharing contractors (PSCs) such as Shell, ExxonMobil and Murphy are likely to award their inspection, repair and maintenance (IRM) jobs very soon.

Liability could well become an investment gem. While its OIC division may potentially drag down earnings in the near term, it could well turn out to be the company’s new “investment darling’’ if it secures a slice of the upcoming Pan-Malaysia transportation & installation (T&I) umbrella contract project worth some MYR3bn-MYR5bn over a two- to three-year period.

Source: RHB