Alam Maritim  has entered into a subscription agreement  in relation to the issuance and allotment of 123m of new shares to raise MYR166.1m.The majority of the proceeds will be used to finance the acquisition of a vessel  (40.5%)  and  repay  its  bank  borrowings  (57.3%).  We  view  the transaction  positive  as  it  may  gear  up  for  more  earnings  accretive acquisitions in the near future. Maintain BUY with MYR1.96 FV.

• Issuing  new  shares.  Alam  Maritim  (Alam)  announced  that  it  has entered into a subscription agreement with Associated Land SB  [48.8% of  new  issue]  (Associated  Land)  and  Caprice  Capital  International  Ltd [51.2% of new issue]  (Caprice)  in relation to  the issuance and allotment of  123m  of  new  shares  to  the  latter.  The  new  shares,  representing 15.35% of  the company’s  existing issued and paid-up share capital, will raise  MYR166.1m  in  proceeds.  The  shares  were  subscribed  for  at MYR1.35 each, and at a 11.09% discount to the stock’s  1-month volume weighted average market price of MYR1.52.
• Utilisation of proceeds.  40.5%  (MYR67.2m) of the  amount  raised will be  used  to  finance  the  acquisition  of  a  new  vessel,  which  we  believe would  be  a  diving  support  vessel  (DSV)  worth  about  USD80m  (c.MYR259.8m). The company  is bidding for  Petronas’  inspection, repair & maintenance (IRM) contracts worth MYR2bn in total  that require the use of a DSV to perform subsea works. 57.3% (MYR95.1m) of the proceeds will be used to repay bank borrowings, while the rest is intended to cover the expenses incurred in relation to the transaction.
• Significant  shareholders.  According  to  The  Star,  Caprice  is a  private investment arm of Paul Poh,  who was formerly attached to Hong Leong Group (HLG)  and whose last position  was as managing director of Hong Leong Management Co SB. He also holds an approximately 4-5% stake in  Scomi  Energy  Services  (SES  MK,  NR),  an  oil  &  gas  drilling  mud specialist. Associated Land, meanwhile, is an indirect subsidiary of Hong Leong Company (Malaysia) Bhd.  
• Maintain  BUY,  with  MYR1.96  FV.  We  maintain  our  BUY  call  and unchanged MYR1.96 FV, still pegged to a target 15x FY14 P/E. We view the transaction  favorably  as  we  expect  it to  cut  Alam’s  gross gearing to 0.67x from 1.07x as per its audited FY12 financial statement. We believe this opens up the possibility of Alam  gearing up for more future  earnings accretive  acquisitions.  The  proposed  issuance,  if  approved,  may  dilute our estimated FY14/FY15 EPS by 15.4%/16.2% respectively.

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Source: RHB