Alam Maritim sails into calm waters

by **Cals** Sun 17 Nov 2013, 21:41

Published: Saturday November 16, 2013 MYT 12:00:00 AM
Updated: Saturday November 16, 2013 MYT 7:12:31 AM
Alam Maritim sails into calm waters
BY YVONNE TAN
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Alam Maritim’s MV Setia Tangkas vessel. The company has put in bids valued at mor e than RM2bil and aims to secure some 20% to 25% of the total.

ALAM Maritim Resources Bhd has been getting a string of contracts lately, pushing its order book to RM1.4bil, possibly one of its highest levels since the financial crisis of 2008.
In September alone, the company which currently derives almost 70% of its revenue from providing offshore support vessel services (OSV), obtained four contracts totalling more than RM120mil.
Last month, it got another RM22mil job supplying tug supply vessels for oil and gas firms to carry out their business activities.
Share price-wise, the Alam Maritim stock has doubled from 72.5 sen on Jan 2 to RM1.48 now, pushing the company’s market capitalisation to above RM1bil.
In the same period, the benchmark index is up only 7%.
“Our shareholders must be happy,” managing director Azmi Ahmad (pic) quips during a short interview with StarBizWeek.
Still, he is far from satisfied and certainly not proud of the company’s achievements so far.
“These (referring to the recent contracts) are the jobs that we had earlier bid for and only recently have they flowed in,” he says.
He is not expecting another “spurt” of contracts until the first quarter of next year.
Alam Maritim has put in bids valued at more than RM2bil, says Azmi, and going by historical data, aims to secure some 20% to 25% of the total.
Profit margins are between 17% and 19%.
“We want to beef up our other segments such as offshore installation and construction as well as sub-sea engineering and water services.”
“Regionally, the company is not doing such businesses yet but we want to go regional in these segments, I think the potential is there,” says Azmi.
Daily charter rates are in the company’s favour as these have been on a general uptrend, going from a low of US$1 per brake horse power (bhp) in 2010 - 2011 to US$1.80 to US$2.20 currently.
OSV firms such as Alam Maritim are picking themselves up, to say the least from a slump that started somewhere in 2010 following the global financial crisis.
At that point, daily charter rates had fallen from a peak of US$2.20-US$2.70 per bhp to a low of US$1/bhp, no thanks to a heady mix of overbuilding, a credit crunch and a slash in oil exploration and production budgets which added salt to the wound.
RHB Research said given the tightening supply of vessels in the Malaysian market, it believed Alam Maritim stands to be the biggest beneficiary of rising demand for OSVs by virtue of its fleet of 44 vessels being one of the largest in the country.
Alex Goh, analyst at AmResearch who also tracks Alam Maritim says he is maintaining his forecast for the company’s FY13- FY15 earnings with assumed higher vessel utilisation rates of 80%-90% as well as underwater and offshore installation & construction orders of RM300mil-RM500mil.
Currently, the company’s vessels utilisation rate stands at about 79%.
Azmi says he wants to improve it by working on enhancing and making more efficient, Alam Maritim’s value-add services such as its maintenance services.
Meanwhile, Goh is expecting the company to make a net profit of RM78.7mil for its FY13, RM119.2mil for FY14 and RM129.mil thereafter.
For FY12, it made some RM60mil in net profit.
“We understand that Alam Maritim hopes to secure RM1.2bil to RM1.5bil worth of contracts for underwater services, which were earlier extended to Offshoreworks Holdings Sdn Bhd, a company currently in financial distress.
“Hence, the group may enter a joint venture with Pacific Radius to acquire two diving support vessels to service its subsea inspection, repair and maintenance contracts, which could easily double prospective net margins,” Goh told clients in a report last month.
RHB Research concurs in saying that fuelled by Petroliam Nasional Bhd’s rising capex, vessel demand going forward should remain buoyant. Petronas has a five-year RM300bil capital expenditure plan to reverse current declining production.
The national oil company said in June that it would have to play catch-up after having spent only RM72bil, or 24%, of that amount between 2011 and January this year. In the same vein, it announced yesterday that it had awarded a major 13-package, five-year offshore hook-up, commissioning and maintenance services contract with a total work value of about RM10bil to six local service providers.
AmResearch’s Goh has a “buy” call on the company and values it at RM2.45 per share while RHB’s target price is RM2.
At the current price, it is trading at an FY14F PE of about 10 times, which is below industry’s average of about 17 times.
While its healthy order book and incoming orders are likely to keep Alam Maritim’s earnings visibility clear for at least the new few years, Azmi says there is no plan for the company to come up with a dividend policy anytime soon.
“We will start rewarding shareholders with something every year but for now, no plans for a dividend policy.”
The company did not pay any dividends the last couple of years.