Thursday, April 24, 2014

AmWatch - Alam Maritim : New diving support ship could easily offset EPS dilution BUY, 24 Apr 2014


STOCK FOCUS OF THE DAY
Alam Maritim : New diving support ship could easily offset EPS dilution  BUY

We maintain BUY on Alam Maritim Resources (Alam) with an unchanged fair value of RM2.05/share, pegged to an FY15F PE of 14x – at an 18% discount to the oil & gas sector’s 17x. Alam has entered into a subscription agreement to issue 123mil new shares (which represent 15% of the group’s share base) at RM1.35/share to Associated Land S/B (AL) and Caprice Capital Intl Ltd. The shares are issued at an 18% discount to the last traded price.AL is an indirect subsidiary of Hong Leong Company (M) Bhd while the major shareholder of Caprice is Paul Poh Yang Hong, a former managing director of Hong Leong Management Co.
The RM166mil placement proceeds will be used to pare down its debts by RM95mil and to partly finance the acquisition of a US$80mil (RM260mil) diving support ship (DSS) from a Singapore-based vessel operator. Hence, the group’s net gearing of 0.3x as at end-FY14F will be largely unchanged. The group plans to take a 51% equity stake in the vessel with an equity-to-debt ratio of 30:70.
We understand that the DSS’ daily charter rate is US$80k-US$120k and the group expects to garner an utilisation rate of 75% based on the activities of underwater inspection, repair and maintenance (IRM) works. Assuming a daily charter rate of US$80k and a conservative utilisation rate of 25%, we estimate that the new vessel will easily offset the FY15F-FY16F EPS dilution from the new shares. But for FY14F, we expect a 9% EPS dilution because any revenue recognition from the vessel will only materialise in 4QFY14.
With this DSS, the group hopes to secure a significant portion of Malaysia’s prospective IRM jobs, potentially worth RM1.8bil-RM2bil over 3 years. Valuations are compelling at an FY15F PE of 11x – 0.6x of the oil & gas sector’s 18x.
.

Others :
CB Industrial Product : Positioned to receive more contracts        BUY
Petronas Gas : Slight enhancement from Pengerang pipeline      HOLD


QUICK TAKE
Kossan Rubber Industries : Final dividend of 3.5sen/share declared         BUY



NEWS HIGHLIGHTS
Media Prima : To maintain growth in FY14F
DRB-Hicom : Proton eyes China production
Barakah Offshore Petroleum : Bags RM260mil contract
Sime Darby : Battersea boom
Power Sector : Tanjong has option for stake in 1MDB power plant



DISCLAIMER:
The information and opinions in this report were prepared by AmResearch Sdn Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmResearch Sdn Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmInvestment Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgement as of this date and are subject to change without notice.



No comments:

Post a Comment

Note: Only a member of this blog may post a comment.

Related Posts with Thumbnails