Alam  Maritim  (AMRB)  reported  on  Bursa  Malaysia  yesterday  that  its wholly-owned  subsidiary,  Alam  Maritim  SB,  has  received  a  letter  of award  from  an  established  oil  &  gas  company  to  provide  one  anchor handling  tug  supply  (AHTS)  vessel.  While  we  are  encouraged  with  its contract win momentum, we retain our earnings forecasts  and reiterate our BUY call on the stock, with an unchanged FV of MYR1.65.

- Yet  another  long  term  charter.  The  contract,  valued  at  approximately MYR71.5m (inclusive of the optional period), is expected to commence in 2H13 and is for a primary period of five years with an extension option for another two years. 

- Favorable charter rates secured.  The value and tenure of the contract represents  an  average  daily  charter  rate  (DCR)  of  some  MYR28k  or USD1.8  per  brake  horsepower  (bhp),  which  is  in  line  with  the  industry average  of  USD1.8-USD2.2  per  bhp.  With  the  win,  we  estimate  that some 80% of AMRB’s vessels are currently on long  term charters, which will boost to the company’s earnings visibility for the next four years.

- Positive  earnings  outlook.  Moving  forward,  AMRB’s  earnings  are expected to be supported by its dominant  offshore support vessel (OSV) division, underpinned by steadier utilization rates and charter rates on top of  its  thriving  third-party  charter  business.  Also,  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.  

- Maintain BUY.  All in all, we make no changes to our earnings estimates and retain our BUY recommendation on AMRB, with an unchanged FV of MYR1.65,  pegged to 14x FY14 EPS. The stock’s key re-rating catalysts are: i) more contract awards for its subsea division, and ii) success in its bid  for  contracts  in  the  Pan-Malaysia  transportation  and  installation project (under its offshore installation and construction division).

Source: RHB