Alam Maritim looking to invest in a diving support ship

by **Cals** Thu 10 Apr 2014, 01:16

Business & Markets 2014

Written by AmResearch

Wednesday, 09 April 2014 10:01

Alam Maritim Resources Bhd
(April 8, RM1.41)
Maintain buy with target price of RM2.05: According to a report in a daily on April 7, Alam Maritim plans to invest in a US$80 million (RM260 million) modern diving support ship (DSS), which will be operated together with a joint venture partner as part of the group’s strategy to secure more underwater inspection, repair and maintenance jobs.
This development is not a surprise to us, as we had highlighted in our report on Sept 18, 2013 that Alam Maritim was looking at entering into a joint venture with Pacific Radius to acquire up to two DSSs.
We understand that the group is exploring a potential 50:50 joint venture to acquire Pacific Radius’ DSS, which requires a technical partner given that this specialised vessel is likely to be on spot charter for that particular market segment.
If Alam Maritim were to acquire a 50% stake in the DSS and assuming a debt to equity ratio of 80:20, we estimate that the group’s net gearing will remain relatively unchanged at 0.3 times at the end of financial year 2014 ending Dec 31 (FY14F).
In our view, we are positive on the group’s further expansion into underwater services as it hopes to secure parts of the RM1.2 billion to RM1.5 billion contracts which were earlier extended to Offshoreworks Sdn Bhd, currently in financial distress.
We also understand that the group is looking at an equity raising exercise via potentially a placement of 10% to 15% as Alam Maritim is exploring new upstream ventures.
As the Alam Maritime and Swiber Offshore joint venture (JV) had failed to secure a package under the Pan-Malaysia transport and installation umbrella concessions late last year, the JV is actively seeking new projects in the region.
We maintain our FY13 to FY15F core earnings. Valuations are compelling at FY14F price-earnings ratio of 9 times — half of the oil and gas sector’s 18 times. — AmResearch, April 7

This article first appeared in The Edge Financial Daily, on April 9, 2014.