MORNING
CALL 22 March
2012
FLOWS;
BUYS: DRBHcm,
Gamuda, PBBank
SELLS:
TimeCom, YTL, CIMB
Technical Stock
Alert;
LBS BINA
(RM0.80) – Price
broken above its SMA 50 levels (RM0.79) after a long consolidation around the
RM0.77. Immediate target of RM0.85 with a mid term target of RM0.955. Catalyst
that could see the follow through buying, launching of their Zhuhai project in
mid 2012. The 60:40 JV with Jiuhou Chin Govt Group is set to develop 79 ha with
a GDV of RM7.5bn. Total group GDV of RM16bn including projects in the
Klang Valley , Batu Pahat, Cameron Highlands , Ipoh
MRCB
(2.03) – Price
threatening to breach above its recent resistance of RM2.04 (SMA 100 line). RSI
at 45 is starting to move higher with MACD hooking up. Short term resistance at
RM2.10 with medium term target of RM2.20. A strong contender to participate in
the development of RRIM’s 1215 ha in Sg Buloh expected to be tendered out by EPF
in June. Current order book of around RM2.2bn.
COMPANY VISIT
NOTE;
ALAM M (RM0.77)
OSV
Segment
-
OSV fleet utliisation
is currently at 78%, of which, 65% are long-term contracts while the balance 35%
of the contracts are on spot charter. AHTS charter rates have remained stable at
US$1.80-2.00 per bhp per day.
-
2x12,000BHP vessel will be delivered
at the end of this year. These vessels will be injected into Alam’s JV company
with LTH. Vessels will be injected at USD31mil per vessel compared to purchase
price of USD27.5mil giving exceptional gains of USD7mil thus recouping its
one-off capitalised interest expense of RM15mil back in 4QFY2011.
-
3 vessels are due for drydock
maintenance for FY2012 costing RM2mil per vessel.
OIC (Offshore,
Installation, Construction) Segment
-
Pipe laying jobs under the Petronas
Umbrella is due to expire in early 2013. Previous winners were Sapuracrest,
Global Offshore (GO), Master Offshore. Recent tie up with Yayasan Sabah has
increased Alam’s chances of taking the Sabah
portion of the Umbrella project which is currently executed by GO. Furthermore
Alam’s 50% owned lay barge with Swiber is relatively new compared to GO’s lay
barge at 43 years.
-
Orderbook stands at RM250mil which
is mainly its SOGT job that has commenced in March with targeted completion in
Sept. Alam is also bidding for RM1bn worth of contracts in Turkmenistan
IRM (Inspection,
Maintenance, Repair) Segment
-
Orderbook is around RM20mil with
this division expected to generate net profit of
RM5-10mil/yr
-
Under Petronas Umbrella program,
contracts are open for tender every 5 years with the last program awarded to
Allied Marine (now under Kencana) and Offshore Work (OW) in 2008. Contract value
is estimated at RM1-2bn.
-
Alam, AM, OW are the 3 companies
with Petronas Umbrella status. This program involves diving equipment and ROV
which Alam already owns thus minimizing the possibility of cost overruns.
Although Alam lost in previous two tenders (2003 & 2008), management are
more confident as OW has ran into financial issues which could potentially see
Petronas revoking its licenses. Contract could be awarded by 4Q2012 and this
could be significant boost to Alam.
-
Alam has applied for license to
operate in the Saudi region. This would open more bidding opportunities with
Alam pairing with a local party.
Key
Risk
-
Delay in long term contracts for OSV
or spot chartered vessels not renewed.
-
Failure in win contracts under
Petronas Umbrella for OIC and IRM segment
Valuations
-
OSV segment remains
the core earning generator with company guidance PBT of RM15mil/Quarter. OIC PBT
margin is estimated at 15%-20% contributing RM12.5-18mil for Alam’s portion
while IRM is likely to contribute around RM10mil. However OIC and IRM
contributions are expected to be lumpy with high operating losses when vessels
are idle. Net profit is estimated to be in the range of RM60-65mil valuing Alam
at 9-10xFY2012PE. Hold call until confirmation of contracts under Petronas
program. Bagging either contract could potentially add net profit of
RM40-50mil/year.