Alam Maritim Resources Bhd (Dec 29, 76.5 sen)
Maintain neutral at 74 sen with fair value of 85 sen: On Wednesday, Alam announced that its wholly-owned subsidiary Alam Maritim (M) Sdn Bhd had received an award from Sarawak Shell Bhd for the E8 and F13K modules offshore transport and installation contract estimated at RM29.8 million. The non-renewable nine-month contract commenced in 4Q11 and is expected to be completed by May 2012.
We had earlier assumed the company would secure some jobs to replenish its order book. The contract amount is not substantial, making up only about 15% of Alam’s total revenue.
In comparison with other listed vessel operators like Perdana Petroleum Bhd, Petra Energy Bhd and Tanjung Offshore Bhd, we see Alam outperforming its peers in terms of new contracts as well as quarterly earnings performance. In 4QFY10, Alam fell into the red with a net loss of RM46.5 million, dragged down by provisions for Vastalux Energy Bhd and remained in the red in 1QFY11 with a net loss of only RM6.8 million, although this was a significant improvement over the preceding quarter.
In 2QFY11, the company managed to chalk up a net profit of RM7 million, making a further improvement in 3QFY11 with a net profit of RM13.4 million on the back of better vessel utilisation. Meanwhile, the results of its peers over those periods were mostly flat or were in red ink quarter after quarter as a result of poor vessel utilisation and a dearth of new contract awards.
We believe that about 50% of Alam’s vessels are now on long-term charters averaging about a year while the remaining 50% are on spot charter.
Hence, although its utilisation rate fluctuates monthly, we understand that on average it is still hovering at 60% to 80%. Judging from the industry’s current operating environment, we believe this rate is reasonable in view of the fact that Petroliam Nasional Bhd and its production sharing contractors are still handing out minimal new vessel contracts.
In the meantime, some of Alam’s peers are struggling with low utilisation rates below 50% even today.
Although we think Alam is outperforming its peers, this development has been partly factored into its share price valuation. Hence, our “neutral” call and fair value for Alam remain unchanged at 85 sen, based on the existing price-earnings ratio of 12 times FY12 earnings per share. — OSK Research, Dec 29
Maintain neutral at 74 sen with fair value of 85 sen: On Wednesday, Alam announced that its wholly-owned subsidiary Alam Maritim (M) Sdn Bhd had received an award from Sarawak Shell Bhd for the E8 and F13K modules offshore transport and installation contract estimated at RM29.8 million. The non-renewable nine-month contract commenced in 4Q11 and is expected to be completed by May 2012.
We had earlier assumed the company would secure some jobs to replenish its order book. The contract amount is not substantial, making up only about 15% of Alam’s total revenue.
In comparison with other listed vessel operators like Perdana Petroleum Bhd, Petra Energy Bhd and Tanjung Offshore Bhd, we see Alam outperforming its peers in terms of new contracts as well as quarterly earnings performance. In 4QFY10, Alam fell into the red with a net loss of RM46.5 million, dragged down by provisions for Vastalux Energy Bhd and remained in the red in 1QFY11 with a net loss of only RM6.8 million, although this was a significant improvement over the preceding quarter.
In 2QFY11, the company managed to chalk up a net profit of RM7 million, making a further improvement in 3QFY11 with a net profit of RM13.4 million on the back of better vessel utilisation. Meanwhile, the results of its peers over those periods were mostly flat or were in red ink quarter after quarter as a result of poor vessel utilisation and a dearth of new contract awards.
We believe that about 50% of Alam’s vessels are now on long-term charters averaging about a year while the remaining 50% are on spot charter.
Hence, although its utilisation rate fluctuates monthly, we understand that on average it is still hovering at 60% to 80%. Judging from the industry’s current operating environment, we believe this rate is reasonable in view of the fact that Petroliam Nasional Bhd and its production sharing contractors are still handing out minimal new vessel contracts.
In the meantime, some of Alam’s peers are struggling with low utilisation rates below 50% even today.
Although we think Alam is outperforming its peers, this development has been partly factored into its share price valuation. Hence, our “neutral” call and fair value for Alam remain unchanged at 85 sen, based on the existing price-earnings ratio of 12 times FY12 earnings per share. — OSK Research, Dec 29
