Alam’s  FY13  net  profit  missed  our/consensus’ estimates  by  10%/11%.The improved  OSV segment,  driven by  higher JV contributions, eased the weak OIC segment plagued by the absence of major contracts.  We trim our FY14/15  earnings  forecasts. We expect a lower utilisation rate due to drydocking  of vessels  and turn cautious on  its  ability to secure contracts. Maintain BUY, with a lower MYR1.96 FV.

• FY13  net  profit  below  expectations.  Alam’s  FY13  full-year  net  profit missed our/consensus’ estimates by 10%/11% respectively. Revenue fell 14% y-o-y due to the absence of major contract in its offshore installation and  construction  (OIC)  segment  throughout  FY13.  A  higher  fleet utilisation  rate  of  around  90%  helped  increase  the  offshore  support vessel  (OSV)  segment’s  revenue  by  more  than  100%.  OSV’s  profit before  tax  (PBT)  improved  due  to  higher  contributions  from  its  jointly controlled entities and stronger operating margins of its vessels.   Weaker 4QFY13 contributions from JVs. The weak 4QFY13 results qo-q was  largely attributed to lower contributions by its joint ventur e (JV) operations (-61% q-o-q, -80% y-o-y), given a lower fleet utilisation rate in the  quarter.  Alam  also  incurred  a  MYR7.7m  withholding  tax  expense inclusive of penalty  in  4QFY13,  after its dispute with the Malaysian tax authority ended in an unfavourable court decision against the company.
• Offshore  installation  work  for  Petronas.  Upstream  reported  in  early February  that Alam,  together with  Swiber Offshore Construction Pte Ltd, has  secured  a  sub-contract  job  from  Technip  and  Malaysia  Marine  & Heavy Engineering (MMHE MK, NEUTRAL, FV: MYR3.80), to undertake the  construction  of  a  central processing platform  (CPP) and  a  bridge in 2HFY15.  While  no  contract  value  was  mentioned,  we  have  imputed conservative  MYR190m/MYR220m  of  contract  wins  for  FY14/15 respectively under the OIC segment.
• Maintain  BUY,  new  MYR1.96  FV.  We  cut  our  FY14/15  earnings forecasts  by  14.6%/10.1%  as:  i)  we  believe  there  will  be  a  number  of vessels being drydocked in FY14/15 for mandatory check, and ii) we turn cautious on  its OIC  business’  ability to secure more jobs going forward. We peg  the stock to  an  unchanged  target FY14 P/E of 15x, in line with other  small-  to  mid-cap  OSV-related  stocks  within  our  coverage. Maintain BUY, with a new MYR1.96 FV (from MYR2.25).

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Company Profile
Alam Maritim (Alam)'s principal activities are in the provision of offshore marine support servic es.

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Source: RHB