AMRB said it has secured a MYR37.9m contract for the provision of a straight supply vessel (SSV) to an O&G company for three years, with an option to extend for one year. This brings its YTD contracts to MYR1.3bn, boosting its earnings visibility for the next few years. We reiterate our BUY rating and MYR2.00 FV as AMRB is one of the largest beneficiaries of rising demand for OSVs in Malaysia.

- Robust demand for offshore supply vessels (OSVs). The contract value implies a daily charter rate of USD1.8/bhp, which we deem fair for a long-term job. This is AMRB’s sixth vessel job within a short span of two months, boosting its outstanding orderbook to an estimated MYR2bn (4x FY12 revenue). In tandem with the strong order intake, we estimate its vessel utilization rate at c. 90%.

- More jobs in the pipeline. We understand that AMRB is currently bidding for more OSV jobs, particularly platform supply vessels (PSVs) and a 12k bhp anchor handling tug/supply vessel (AHTS). Given the tightening supply of vessels in the Malaysian market, we believe the company stands to be the biggest beneficiary of rising demand for OSVs by virtue of its fleet of 44 vessels (including JVs/associates) being one of the largest in the country.

- Potential wild card. AMRB is bidding for jobs in the Pan Malaysia cluster involving subsea inspection, repair and maintenance (IRM) worth up to MYR2bn. We believe that it stands a good chance of securing some of the packages given the lack of credible local players. The company has also submitted bids for the Pan Malaysia transport and installation projects (package A: estimated at MYR2bn) via its 1MAS300 pipe-lay barge, for which the outcome may only be announced in 1Q14.

- Maintain BUY. We maintain our earnings forecast for now as we have incorporated a high vessel utilization rate. AMRB is set to benefit significantly from the robust prospects for offshore jobs, fuelled by Petronas’ rising capex, which may propel vessel demand going forward. We reiterate our MYR2.00 FV, based on 14.4x FY14 EPS, which implies a 28% upside potential.  

Source: RHB