KUALA LUMPUR (Jan 16): Investors chased Alam Maritim Resources Bhd shares, pushing the stock up as much as 2.3% after analysts upgraded the oil and gas (O&G)support services entity.
The earnings and target price upgrade came following news that Alam Maritim has secured a RM576 million offshore support vessel (OSV) lease contract with Petronas Carigali Sdn Bhd.
At 9.28am, Alam Maritim was trading at 87 sen, with 10 million shares done, after rising as much as two sen to 87.5 sen earlier. The stock was the fourth most active on the exchange in morning trade. It was also the top turnover counter.
Affin Investment Bank analyst Isaac Chow said the research firm has increased its earnings per share (EPS) forecast for Alam Maritim by 7% each in financial years ending December 31, 2013 (FY13) and FY14.
In tandem with the earnings upgrade, Affin has also raised its fair value for the stock to RM1.15 from RM1.07 while maintaining its "buy" call.
Chow said Alam Maritim is Affin's top pick among the O&G small and mid-cap stocks for its undemanding valuation at nine time CY13 EPS, strong earnings growth recovery, helped by higher levels of activities across all sectors, and anticipated value-accretive corporate exercises.
Meanwhile, AmResearch Sdn Bhd analyst Alex Goh said the research firm has raised its fair value for Alam Maritim to RM1.10 from 85 sen previously although its "buy" call remains.
The higher fair value followed AmResearch's upward revision of Alam Maritim's FY13 and FY14 earnings by 6% to 13% on a 5% higher charter rate assumption for the company.
Goh said this comes against the backdrop of "steadily improving market for OSV.
"While the stock price has outperformed the FBMKLCI by 61% over the past six months, valuations are still compelling at an FY13 PER (price- to-earnings ratio) of 10 times – way below the O&G sector’s 16 times.
"We will be meeting up with management soon for further updates on the group’s progress,"Goh wrote in a note.
Alam Maritim told the exchange on Tuesday that the firm had secured a letter of award from Petronas Carigali for the lease of six marine vessels to the national oil company. The five-year contract, effective January 1 2013 to December 31, 2017,
The estimated contract value RM576 million takes into account the one-year extension for the leaseaccording to Alam Maritim. Affin’s Chow said the estimated daily charter rate (DCR) of between US$1.90 and US$2.10 (between RM5.73 and RM6.34) per brake horsepower (bhp) per day is deemed attractive.
The DCR is not only comparable to existing market rates but is also higher than Perdana Petroleum’s DCR from its recent RM430 million contract, according to Chow.
"The long contract tenure will ensure full vessel utilisation and anchor earnings visibility for the next five years; and the contract had kicked-in earlier than-expected (effective January 1, 2013), thereby, mitigating the seasonal weakness in 1Q13," the analyst said.