Wintermar Offshore Marine (WINS IJ, BUY, TP IDR1,200): 1Q14 Results Review: 1Q14 In Line – Bright Years Ahead

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Wintermar Offshore Marine (WINS IJ, BUY, TP IDR1,200): 1Q14 Results Review: 1Q14 In Line – Bright Years Ahead

1Q14 earnings reached USD8m (-12.9% q-o-q; +30.5% y-o-y), in line with our expectations (22% of our FY14 estimate). We believe the company should be rated against its regional peers, which benefit from the cabotage, or local content ruling. We increase our TP to IDR1,200 with a target PER of 12x (previously 9.4x), premised on the sector’s strong growth (multi-year boom) and better industry visibility. Maintain BUY.

       1Q14 highlight. Wintermar Offshore Marine’s 1Q14 revenue reached USD46m, down 18.6% q-o-q mainly due to lower revenue from its own vessels (-12.7% q-o-q) and lower 3rd party chartered vessels (-27.0% y-o-y). As it added more higher-tier vessels (giving higher margin) to its fleet portfolio, 1Q14 own vessel margin improved to 57.5% from 54.3% in 4Q13. Meanwhile, its 1Q14 3rd party chartered vessel gross margin improved to 8.8%, from 7.8%, bringing gross profit 1.8% higher q-o-q to USD17m. In 1Q14, total assets increased to USD466m, from USD422m in 2013. Net gearing increased to 76.2% in 1Q14, vs 59.3% in 4Q13.

       Three additional vessels YTD. On a year-to-date period, Wintermar Offshore Marine has already acquired three new vessels, which are a mix of mid- to high-tier vessels. We expect it to acquire another two mid-tier vessels to come in in 2H14, with total FY14 vessel expansion capex of USD60m.

       More big O&G projects post-election period. We expect several major oil and gas projects, which need government approval, to be delayed in 1H14 - given the focus on the election. However, we expect continuous exploration project activities, as well as more oil and gas activities post the election period.

       Upgrade TP to IDR1,200; BUY. We believe Wintermar Offshore Marine should be rated against its peers in Southeast Asia that benefit from the cabotage or local content ruling, as these companies enjoy higher vessel charter rates, stronger fleet utilisation, favourable reinvestment opportunities and higher earnings visibility. We raise our TP to IDR1,200 (from IDR1,000) with a target PER of 12x (vs 9.4x), premised on the sector’s strong growth (multi-year boom) and better industry visibility.

Best regards,

RHB OSK Indonesia Research Institute

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