AmWatch - Alam Maritim : Eyeing subcontracting jobs from Pan-Malaysian T&I BUY, 21 Apr 2014

STOCK FOCUS OF THE DAY

Alam Maritim : Eyeing subcontracting jobs from Pan-Malaysian T&I          BUY

We maintain BUY on Alam Maritim Resources (Alam) with an unchanged fair value of RM2.05/share, pegged to a FY14F PE of 16x – at parity to the oil & gas sector. The Edge Malaysia reported that Alam is in discussions with Barakah Offshore Petroleum, Puncak Oil & Gas and SapuraKencana Petroleum to undertake subcontracting works for the 3-year Pan Malaysian T&I programme.

This is not a surprise as we had indicated in our past reports that the major concessionaires for these works would need additional construction vessels. But the actual initial rollout of the T&I works has been slow in 1H2014 due to planning, procurement, engineering and mobilisation activities. Hence, any subcontracting works for Alam will only likely to materialise in 3QFY14.

Recall that Barakah was awarded Package A which could be worth RM2bil, Puncak secured the RM3bil Package B while Sapurakencana won Packages C and D which have a value of up to RM6bil late last year. There are other players such as Perisai Petroleum, Target Energy, Sigur Ros and TH Heavy Engineering which have the capability to undertake some of the works from the main contractors.

For now, we are uncertain of the actual sub-contracting jobs that could be up for offer given that SapuraKencana will be taking delivery of two new construction vessels while Puncak Oil & Gas had earlier teamed up with Leighton Holdings in the earlier tender process.  We remain positive on the group’s further expansion into the group’s underwater services as Alam hopes to secure parts of the RM1.2bil-RM1.5bil contracts, which were earlier extended to Offshoreworks Group, currently in financial distress. Valuations are compelling at an FY14F PE of 12x – 33% of the oil & gas sector’s 18x.

Others :

Malaysia Airports : CCC finally handed over          HOLD

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Construction Sector : Temporary water pipes mooted    OVERWEIGHT

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