Alam Maritim Resources BUY
Price target RM2.70
Share price at 28 Feb RM2.12
Investment summary
FY07 earnings were 12-16% ahead of HLG/consensus estimate, due to higher-than-expected vessel utilization rates during the year. We raise Alam from a HOLD to a BUY: (1) recent -14% share price decline is unwarranted given resilient vessel charter rates; (2) valuations are attractive, at 14x FY08 PE and above-market 27% EPS CAGR over FY07-09E, purely on the basis of scheduled vessel deliveries and current spot charter rates. We remain positive on O&G vessel owner/operators sector: (1) charter rates continue to remain strong with new-builds lagging behind replacement market (2) the number of Malaysian flagged vessels is way below Petronas domestic demand.
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Share price has fallen 25% from its Nov07 peak, despite near-term positives: (1) 50% fleet expansion in 2008; (2) charter rates have been consolidating since Q307, and could resume its upward trend by mid-yr.
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Tuesday, 4 March 2008
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