Stock Name: ALAM
Company Name: ALAM MARITIM RESOURCES BHD
Research House: OSK
Alam Maritim Resources Bhd
(April 26, RM1.18)
Maintain buy at RM1.14 with target price of RM1.50: Yesterday, Alam announced that its 100%-subsidiary, Alam Maritim (M) Sdn Bhd, has entered into two charter party agreements with two oil and gas (O&G) services companies for the provision of one work boat and one four-point mooring system work boat for a total of RM24.8 million.
Separately, it has also entered into a contract with an established oil major for the provision of one work boat and one anchor handling tug supply'' (AHTS) vessel for a total of RM8.8 million.
The value is small because the charter period is less than two months, unlike that for the first contract of two months to a year. Having said that, the contracts are estimated to total RM33.6 million.
This is a positive development but we make no change to our FY11 earnings because we had earlier assumed some order book replenishment for the company's vessels.
We understand that the offshore marine support vessel industry is still suffering from sluggish utilisation of vessels due to an oversupply caused by delays in awarding new O&G projects.
Most vessels, especially the older ones with expired contracts, have been left idle.
We also understand that Alam's fleet utilisation is close to about 70% after taking up these short-term and ad hoc vessel chartering jobs, and the company is waiting for the bigger and longer-term vessel contracts to be awarded.
We think that the next major award would come from marginal oilfields but we also understand that most of these oilfields are still at the developers' bidding stage.
As such, we think the situation would probably last up to 4Q11 before massive vessel contracts are rolled out.
We understand that the company has 37 vessels comprising 17 AHTS (mostly 5,000 bhp), 17 supply and utility vessels, two accommodation vessels and one pipe-lay barge.
The company also expects to receive two 12,000 bhp AHTS by 2012 to complement its existing fleet.
Hence, given that its vessels are mostly the smaller horse-power vessels and the water conditions at most of the marginal oilfields are not that demanding, we think that Alam may be one of the main beneficiaries of such developments, especially during the development and production stages of the fields.
As we mentioned earlier, the worst may be over for Alam after the company undertook a kitchen sinking exercise in FY10.
We maintain a 'buy' on the company for now, with an unchanged target price of RM1.50 based on the existing price-earnings ratio of 15 times FY11 earnings per share. ' OSK Research, April 26
This article appeared in The Edge Financial Daily, April 27, 2011.
Company Name: ALAM MARITIM RESOURCES BHD
Research House: OSK
Alam Maritim Resources Bhd
(April 26, RM1.18)
Maintain buy at RM1.14 with target price of RM1.50: Yesterday, Alam announced that its 100%-subsidiary, Alam Maritim (M) Sdn Bhd, has entered into two charter party agreements with two oil and gas (O&G) services companies for the provision of one work boat and one four-point mooring system work boat for a total of RM24.8 million.
Separately, it has also entered into a contract with an established oil major for the provision of one work boat and one anchor handling tug supply'' (AHTS) vessel for a total of RM8.8 million.
The value is small because the charter period is less than two months, unlike that for the first contract of two months to a year. Having said that, the contracts are estimated to total RM33.6 million.
This is a positive development but we make no change to our FY11 earnings because we had earlier assumed some order book replenishment for the company's vessels.
We understand that the offshore marine support vessel industry is still suffering from sluggish utilisation of vessels due to an oversupply caused by delays in awarding new O&G projects.
Most vessels, especially the older ones with expired contracts, have been left idle.
We also understand that Alam's fleet utilisation is close to about 70% after taking up these short-term and ad hoc vessel chartering jobs, and the company is waiting for the bigger and longer-term vessel contracts to be awarded.
We think that the next major award would come from marginal oilfields but we also understand that most of these oilfields are still at the developers' bidding stage.
As such, we think the situation would probably last up to 4Q11 before massive vessel contracts are rolled out.
We understand that the company has 37 vessels comprising 17 AHTS (mostly 5,000 bhp), 17 supply and utility vessels, two accommodation vessels and one pipe-lay barge.
The company also expects to receive two 12,000 bhp AHTS by 2012 to complement its existing fleet.
Hence, given that its vessels are mostly the smaller horse-power vessels and the water conditions at most of the marginal oilfields are not that demanding, we think that Alam may be one of the main beneficiaries of such developments, especially during the development and production stages of the fields.
As we mentioned earlier, the worst may be over for Alam after the company undertook a kitchen sinking exercise in FY10.
We maintain a 'buy' on the company for now, with an unchanged target price of RM1.50 based on the existing price-earnings ratio of 15 times FY11 earnings per share. ' OSK Research, April 26
This article appeared in The Edge Financial Daily, April 27, 2011.
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