Stock Name: ALAM
Company Name: ALAM MARITIM RESOURCES BHD
Research House: OSK
Alam Maritim Resources Bhd
(Feb 21, RM1.05)
Maintain buy at RM1.07 with target price RM1.50: As we highlighted in our December 2010 company update, there may be a provision for doubtful debts arising from Vastalux Energy Bhd amounting to RM30 million. Also, we note that the meeting of Vastalux creditors in the same month was inconclusive because creditors, including Alam Maritim did not agree to Vastalux's proposals. The proposals include the issuance of 117.5 million new Vastalux shares, 50% to be settled through the issuance of 293.6 million redeemable cumulative unsecured loan stocks (RCULS) and the remaining 30% to be waived. Hence, we do not discount the possibility of Alam Maritim's management making a provision for the sum owing to it, and if it does, the company's 4QFY10 results are likely to fall into the red.
This is because we noted that there had been no change in the company's operating environment in 4QFY10, as it did not announce any major vessel contracts or the revision of charter rates. With Alam Maritim's 9MFY10 and 3QFY10 net profit coming in at RM47.4 million and RM8.9 million respectively, we expect a consistent quarter if no provisions for Vastalux are made.
Given that Petronas has been aggressively awarding new oil and gas contracts, especially those relating to existing and marginal oilfield developments, we believe Alam Maritim stands a good chance of securing some of these jobs since its fleet utilisation is at about 70%, which indicates that there is still room to grow its earnings. Also, the company has the right asset mix (comprising mainly 5,000 bhp vessels), which fits into the current O&G development theme.
Our target price for Alam Maritim remains unchanged at RM1.50 based on a PER of 15 times FY11earnings. Although investors may be uncomfortable with the negative news flow on Vastalux, we believe that this unfortunate event would probably have been built into its current share price, and that investors should turn to the company's longer-term outlook instead. ' OSK Investment Research, Feb 21
This article appeared in The Edge Financial Daily, February 22, 2011.
Company Name: ALAM MARITIM RESOURCES BHD
Research House: OSK
Alam Maritim Resources Bhd
(Feb 21, RM1.05)
Maintain buy at RM1.07 with target price RM1.50: As we highlighted in our December 2010 company update, there may be a provision for doubtful debts arising from Vastalux Energy Bhd amounting to RM30 million. Also, we note that the meeting of Vastalux creditors in the same month was inconclusive because creditors, including Alam Maritim did not agree to Vastalux's proposals. The proposals include the issuance of 117.5 million new Vastalux shares, 50% to be settled through the issuance of 293.6 million redeemable cumulative unsecured loan stocks (RCULS) and the remaining 30% to be waived. Hence, we do not discount the possibility of Alam Maritim's management making a provision for the sum owing to it, and if it does, the company's 4QFY10 results are likely to fall into the red.
This is because we noted that there had been no change in the company's operating environment in 4QFY10, as it did not announce any major vessel contracts or the revision of charter rates. With Alam Maritim's 9MFY10 and 3QFY10 net profit coming in at RM47.4 million and RM8.9 million respectively, we expect a consistent quarter if no provisions for Vastalux are made.
Given that Petronas has been aggressively awarding new oil and gas contracts, especially those relating to existing and marginal oilfield developments, we believe Alam Maritim stands a good chance of securing some of these jobs since its fleet utilisation is at about 70%, which indicates that there is still room to grow its earnings. Also, the company has the right asset mix (comprising mainly 5,000 bhp vessels), which fits into the current O&G development theme.
Our target price for Alam Maritim remains unchanged at RM1.50 based on a PER of 15 times FY11earnings. Although investors may be uncomfortable with the negative news flow on Vastalux, we believe that this unfortunate event would probably have been built into its current share price, and that investors should turn to the company's longer-term outlook instead. ' OSK Investment Research, Feb 21
This article appeared in The Edge Financial Daily, February 22, 2011.
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