Jun 26, 2014

Alam Maritim – Target Price RM2.10

Alam Maritim Resources (ALAM) Code 5115 Current Price RM1.57 (24th June)

Wasco Energy is a new JV partner

Wasco Energy is a new JV partner, replacing CIMB-PE
Alam announced that the group had on 24 June 2014 signed a joint venture agreement (JVA) with Wasco Energy Ltd, a wholly-owned subsidiary of Wah Seong Corporation Berhad. This JVA shall be effective on the date upon which Wasco become a shareholder of Alam-PE Holdings (L) Inc (Alam-PE). Prior to the above JVA, Alam-PE is a joint venture company owned by Alam (49%) and
CIMB Private Equity Sdn Bhd (51%). Wasco had on 24 June 2014 signed a share sale agreement with CIMB-PE where Wasco had agreed to acquire from
CIMB-PE a 49% stake in Alam-PE for RM106m. Meanwhile, Alam will acquire a
2%-stake in Alam-PE from CIMB-PE, thereby increasing its stake to 51%.

Information on Alam-PE
Alam-PE was incorporated in Labuan on 17 October 2008. Alam-PE currently owns 5 units of OSVs – Setia Kental and Setia Gigih (supply and support vessels), Setia Ulung and Setia Aman (accommodation workboats) and Setia Hebat (a 5,000-bhp AHTS vessel with DP1 capability). Alam-PE reported a profit
after tax of RM33.6m in FY12 and RM34.4m in FY13. As at end-December 2013, Alam-PE has a shareholders funds of RM144.7m and total borrowings of
RM104.7m. Wasco’s purchase price of RM106m (for a 49%-stake) valued Alam-
PE at an implied 6.3x FY13 earnings and 1.5x book value. The valuation may not be directly comparable to the listed OSV operators due to various factors such aslisting status, scale of operation, licence conditions, type of vessels, future prospects and expansion plans.

Alam Maritim Earning and Valuation Summary (click to enlarge):

alam_maritim_analysis
Mildly positive on the change in JV partner
We are mildly positive on the change in JV partner to Wasco. We opine that there are synergies that could be extracted under the Alam-Wasco partnership.
Wasco is an established player in the manufacturing & coating of pipeline for the oil & gas industry while its 26.9%-owned associate company, Petra Energy is a key player in Malaysia’s hook-up & commissioning and topside maintenance market. Also, the change in ownership may pave way for Alam-PE to undertake a more aggressive expansion strategy.

Maintain BUY with an unchanged TP of RM2.10
We maintain our earnings forecast, BUY rating and TP of RM2.10 based on 14x
CY15 EPS. We continue to like Alam for its undemanding valuation of 10.5x CY15 PER, strong earnings growth driven by higher activities across all business segments and potential value accretive business expansions/ corporate exercises. Key risks to our positive view on Alam Maritim are a slowdown in Malaysia O&G activities, lower-than-expected subsea & OIC contract wins, failure to secure customers for its pipelay barge, unexpected operational hiccups and weaker-than-expected quarterly earnings

by AffinBank

Alam Maritim Resources BHD is a Malaysia-based investment holding company. Through its subsidiaries, the Company is engaged in two business activities offshore support vessels and services, offshore facilities construction, installation and underwater services.