Tuesday, December 10, 2013

ASL Marine : Not resting on its laurels (CIMB)

ASL Marine
Current S$0.65
Target S$0.90
Not resting on its laurels

ASL is shifting its business model to speculative building, which offers customers convenience and flexibility. This makes sense in an improving OSV market.

Our FY14-16 forecasts and target price, still based on 0.9x CY14 P/BV, its 5-year mean, are unchanged. Under our new rating structure, our call changes from Outperform to Add. Catalysts could come from shipbuilding sales, faster turnaround of Vosta and big repair jobs.

No black sheep
We expect ASL to continue its good form from FY13, propped up by all its segments. Shipbuilding will continue to benefit from its order book of S$268m, which secures our FY14-15 forecasts. In addition, ship repair will be boosted by the completion of five units of rig repair (estimated contract value of S$30m-40m) in FY14. ASL only recognises revenue from ship repair work upon completion. Ship charter is also expected to do well with the deployment of more bareboat charters of its OSVs. Lastly, we expect Vosta‟s losses to narrow in FY14.

Not resting on its laurels
To compete more effectively against Chinese yards, ASL is shifting its business model to build-to-stock from build-to-order. It will start building four generic-designed AHTS (6,000-8,000 bhp) and one maintenance work vessel in 2014. These vessels will cost S$85m in total and will be financed through ASL‟s S$170m bonds. We concur that the refocus makes sense as build-to-stock offers convenience and flexibility to customers, especially in an improving OSV market.

Value play
We see value in ASL as it trades at 0.6x CY14 P/BV against a 3-year forward average ROE of 9.1% vs. COE of 9.3% (including 300bp for small-mid cap spread).

Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date: 29/11/13

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