Stock Name: ALAM
Company Name: ALAM MARITIM RESOURCES BHD
Research House: KENANGA
Alam Maritim Bhd
(March 19, RM1.80)
Maintain buy with an unchanged target price of RM2.25: Alam Maritim announced last Thursday that it was awarded a contract worth about RM19 million by an established offshore installation & construction contractor (OIC) for the provision of a ""launch barge''.
The primary period of the contract is 45 days (inclusive of mobilisation and demobilisation period) while options for weekly extension will by mutual agreement; exercised seven days prior to option period. The barge is tentatively set to be delivered for on-hire on March 27.
The ""launch barge'' is a normal barge, similar to a flat floating bed that is utilised to carry offshore structures to the site where they are to be installed (launched). The barges typically need to be towed by AHTS vessels as they have no engines installed.
Implied charter rates are high, at around RM400,000 (about US$120,000) per day based on the contract worth (RM19 million) and period (45 days).
The rates fall within the guided US$125,000 per day rates Alam previously paid to rent a pipe-lay barge from external parties for their last OIC projects. Hence, we gauge the market for barges remains intact, buoyed by the scarce supply of such assets in the region.
Barge rented from JV partner Swiber, hence net margins are a minimal 15%. This translates to a net profit of around RM2.9 million for the overall project.
Nevertheless, the high per day charter rates highlight how lucrative the OIC market is and once they receive their pipe-lay barge (50:50 JV with Swiber); guided by mid-2010; Alam's earnings are set for new heights. At present, our estimates have not incorporated the potential earnings of the pipe-lay barge.
We maintain a buy recommendation and target price of RM2.25. Earnings estimates unchanged at this juncture given the minimal net earnings of the contract.
However, we do see value in Alam's bid to diversify itself from being the "run-of-the-mill" offshore marine vessel provider. Valuations remain attractive at 7.9 times FY2010 earnings versus peer's average of 10.9 times. - Kenanga Research, March 19
This article appeared in The Edge Financial Daily, March 22, 2010.
Company Name: ALAM MARITIM RESOURCES BHD
Research House: KENANGA
Alam Maritim Bhd
(March 19, RM1.80)
Maintain buy with an unchanged target price of RM2.25: Alam Maritim announced last Thursday that it was awarded a contract worth about RM19 million by an established offshore installation & construction contractor (OIC) for the provision of a ""launch barge''.
The primary period of the contract is 45 days (inclusive of mobilisation and demobilisation period) while options for weekly extension will by mutual agreement; exercised seven days prior to option period. The barge is tentatively set to be delivered for on-hire on March 27.
The ""launch barge'' is a normal barge, similar to a flat floating bed that is utilised to carry offshore structures to the site where they are to be installed (launched). The barges typically need to be towed by AHTS vessels as they have no engines installed.
Implied charter rates are high, at around RM400,000 (about US$120,000) per day based on the contract worth (RM19 million) and period (45 days).
The rates fall within the guided US$125,000 per day rates Alam previously paid to rent a pipe-lay barge from external parties for their last OIC projects. Hence, we gauge the market for barges remains intact, buoyed by the scarce supply of such assets in the region.
Barge rented from JV partner Swiber, hence net margins are a minimal 15%. This translates to a net profit of around RM2.9 million for the overall project.
Nevertheless, the high per day charter rates highlight how lucrative the OIC market is and once they receive their pipe-lay barge (50:50 JV with Swiber); guided by mid-2010; Alam's earnings are set for new heights. At present, our estimates have not incorporated the potential earnings of the pipe-lay barge.
We maintain a buy recommendation and target price of RM2.25. Earnings estimates unchanged at this juncture given the minimal net earnings of the contract.
However, we do see value in Alam's bid to diversify itself from being the "run-of-the-mill" offshore marine vessel provider. Valuations remain attractive at 7.9 times FY2010 earnings versus peer's average of 10.9 times. - Kenanga Research, March 19
This article appeared in The Edge Financial Daily, March 22, 2010.
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