May 20, 2010

Alam Maritim a buy with TP RM2.30 : HWDBS

Alam Maritim (RM1.62; Buy; Price Target: RM2.300

Proposed bonus issue
Alam Maritim (Alam) has proposed to undertake a bonus issue exercise on the basis of one bonus share for every two existing shares that would be subjected to the approval of shareholders at the upcoming AGM. The corporate exercise is scheduled for completion in 3Q10.

As at 13 May 2010, Alam has an outstanding share capital of 508.5m shares as well as 36.5m exercisable ESOS. Assuming a scenario where the ESOS are exercised completely, the bonus issue will entail the issuance of 272.5m new shares, bringing to an enlarged share base of 817.4m shares. We think this may help improve the stock liquidity in the future.

We maintain our Buy call on Alam for its earnings delivery track record and potential new vessel contracts. Our target price of RM2.30 is pegged to 9.0x CY10F earnings. Alam is currently trading at 6.1x CY11F PE against sector’s weighted average of 8.2x, respectively.

by HWDBS Vickers