May 20, 2010

ALAM - OSK Research maintains buy call on Alam Maritim

Stock Name: ALAM
Company Name: ALAM MARITIM RESOURCES BHD
Research House: OSK

KUALA LUMPUR: OSK Investment Research has maintained its buy recommendation on ALAM MARITIM RESOURCES BHD [] at RM1.62 with a target price of RM2.99 after the company on Wednesday proposed to undertake a bonus issue of up to 272.5 million bonus shares.

The bonus issue will be on the basis of one new bonus share for every two existing shares and will be held at a date to be determined and announced later.

The research house said historically, Alam's shares have not been very liquid, with the three-month average volume being less than 500,000.

Its free float is also less than 40%, as the bulk of its shares is controlled by its major shareholder, SAR Venture Holdings SB, which has 50% equity interest, it said.

"Assuming that all its ESOS shares totaling 36.5 million shares were exercised, the bonus issue would increase its issued share capital to about 800 million shares compared with the existing 500 million shares.

"Besides increasing its share liquidity, the bonus issue is also meant to reward Alam's existing shareholders as they now would have more shares to trade," it said.

OSK Research said its target price for Alam remains unchanged at RM2.99 based on existing PER of 12 times FY10 earnings.

"Our ex-bonus fair value will be revised down to RM1.99 while the theoretical share price will adjust to an ex-bonus price of RM1.08, which still provides about 84% upside from the current price.

"Going forward, we continue to like the company's sound strategy in penetrating new businesses (such as its pipelay barge) and new geographical markets (Middle East and India), and its solid financial strategy (using the JV option to finance its new vessels), which will not only safeguard its gearing but also instill investor confidence in the company," it said.

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