30 JEWELS 2013 Edition
Board This Boat Now
•Its offshore support vessel (OSV) business is set to have an 80%- 85% utilization rate over the next two years
•Potential winner for the upcoming transportation & installation (T&I) tenders in the Pan-Malaysia field worth MYR2bn-MYR3bn
•Potential winner for the upcoming inspection, repair and maintenance (IRM) tenders worth MYR1bn-MYR2bn
Alam Maritim (AMRB)'s principal activities are in the provision of offshore marine support services. It also provides transportation & installation (T&I) and subsea services.
OSV business doing well. Some 80%-85% of AMRB’s OSVs are currently on long-term charters spanning one to five years. We believe that this business division will be AMRB’s cash cow over the next two years. Potential earnings upside could come from AMRB winning new T&I tenders for its offshore, installation and construction (OIC) division as well as IRM tenders for its subsea division.
More IRM jobs in the making. Production-sharing contractors such as Shell, ExxonMobil, Carigali Hess and Murphy will likely call for IRM tenders this year. Having secured a MYR180m IRM contract from Talisman earlier this year, AMRB is a key contender for these jobs, which are valued at a combined MYR1bn-MYR2bn spanning over three to four years.
T&I potential. Petronas has already issued tender documents for the next round of Pan Malaysia T&I umbrella contracts worth some MYR3bn. Of the five contracts being awarded, AMRB may tender for two of them. Despite facing stiff competition, we believe AMRB has the chances of winning as its pipelay barge meets the technical requirements for the tender. In the worst case scenario, AMRB will still benefit as a sub-contractor, albeit the deal may be less lucrative.
Company Report Card
Latest results. AMRB’s 1QFY13 results came in above our expectations. We keep our earnings forecasts unchanged as we expect activities to slow down in 4QFY13 due to the seasonal monsoon season.
Balance sheet / Cashflow. AMRB’s net gearing ratio stood at 1x as at end-1QFY13. While the Group’s balance sheet will likely remain stretched in the near term due to its inability to add new assets, this is not a major concern as AMRB is currently generating positive operating cashflows.
ROE. We expect ROEs to come in at 13.4%-16.1% for FY13-FY15.
Dividend. We are not projecting any dividends for now in view of the Group’s tighter cashflow to meet near-term debt obligations.
Management. Led by En Azmi bin Ahmad and Dato’ Captain Ahmad Sufian, both veterans in the OSV business and played a critical role in growing the company to what is it today. We believe that under their leadership, AMRB will likely secure more contracts in the upcoming tendering of T&I and IRM jobs.
BUY. We have a BUY recommendation on AMRB. We like its earnings visibility, which is strongly supported by its OSV division and a threeyear contract from Talisman for its subsea division. We see more upside to its earnings visibility if it secures more contracts for its OIC and subsea division. Our MYR1.65 valuation is pegged to 14x FY14 EPS.