Alam Maritim Resources BUY
Price target RM2.70
Share price at 08 Apr RM2.02
Investment summary
Yesterday, Alam secured a RM100m contract to extend the charter for Setia Jaguh (8920 bhp) and Setia Padu (5150 bhp). The implied daily charter rate (DCR) at USD2.00/bhp is 50-70% higher than the previous contract, and 10% higher than spot USD1.80/bhp rates 6 months ago. We maintain our BUY call on Alam: (1) 18% share price decline YTD is unwarranted given that charter rates have shown no sign of weakness (2) valuation at 14x FY08 PE is comparable with KLCI, but with 28% earnings growth pa over FY08-10E driven by higher charter rates and new vessel delivery. 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 vessel remains below Petronas requirement.
Charter rates inching up
Charter rates have risen 10% in the last 6 mths, while vessel owner/operator share prices fell 20-40% YTD. We think the second round of Petronas charter awards in Q308 could renew investment interest in the sector.
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Tuesday 15 April 2008
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