Stocks In Focus MY (Alam Maritim, Deleum, PPB Grp) – 06/03/15
ALAM (5115), DELEUM (5132), PPB (4065)
Alam Maritim Wins Contract From Petronas Carigali
Alam Maritim Resources received a two-year umbrella contract starting from January 2015 for the provision of spot charter for marine vessels from Petronas Carigali for its Malaysian operations, with an option for a one-year extension. The company had won seven of the eight packages which allow it to provide marine vessels.
AmResearch predicts that charter rates in the future will be low since Petronas has started bargaining for lower charter rates as part of its objective of optimising its cost structure, which consists of lowering capital expenditure by 10 percent to 15 percent in the next two years and slashing operating expenditure by 30 percent. However, the research house foresees that there will be a pick-up in earnings momentum in the firm’s offshore, installation and construction division in 2H15 when a RM248 million transport and installation contract secured with MMHE and Technip is executed.
The group plans to go for smaller contracts with higher success rates. To date, it has won an RM30 million contract where the margin was more than 50 percent due to early completion. The group’s order book now stands at approximately RM1.1 billion (excluding the umbrella contract), of which 50 percent are from offshore supply vessels while its tender book stands at RM2 billion.
Significance: AmResearch has maintained its ‘Hold’ rating on Alam Maritim Resources with an higher target price of RM0.67. It did not change its earnings as the value of the umbrella contract has yet to be settled and will depend on the actual number of days the vessels are chartered.
Deleum Maintained At Hold With Lower Target Price
Deleum’s RM3.8 billion order book provides long term earnings visibility as the group’s lengthiest contract extends to 2023, according to AllianceDBS Research. It added that important contracts that will support earnings going forward are the firm’s umbrella contracts for the supply and maintenance of gas turbines (RM2 billion to RM2.5 billion estimated outstanding value), provision of slickline equipment and services (RM750 million estimated outstanding value), and smaller contracts for corrosion control and chemical supplies.
However, with Petronas cutting operating expenditure, the research house anticipates that the growth of the group will be dampened since its contracts are mainly on an on-call basis, especially in the case of the gas turbine contracts, for which there will be lower demand.
That said, the research firm noted that the slickline contract, of which 80 percent of the 55 units rolled out are on a take-or-pay basis, will tide the group through FY15 and predicts that growth in FY15 will be modest at 6 percent before offshore activities normalise in FY16, spurring growth of 11 percent.
Significance: Given the firm’s flat outlook, AllianceDBS Research has retained its ‘Hold’ call on the stock, with a lower target of RM1.60 (based on 10 times FY15 price-to-earnings ratio), after factoring higher interest expenses. Going forward, the research house also expects a healthy dividend yield of 5 percent to help support the shares.
PPB Allocates RM535m For Capex
PPB Group will be allocating RM535 million of capital expenditure over the next two to three years primarily to expand its Golden Screen Cinemas (GSC) chain and grow its flour and feed milling and grains trading business. It is also exploring new markets in South-East Asia and beyond, where it hopes to capitalize on its expertise in milling good flour.
The company will be reserving RM283 million for its film exhibition and distribution division to open 11 new cinemas, upgrade its existing cinema equipment, extend three existing cinemas and possibly increase its investment in Vietnamese company Galaxy Studio Joint Stock Co. It hopes to expand by 100 screens from this year till 2017 and plans to expand its cinema chain’s presence in the Klang Valley.
The firm will be spending RM208 million on expanding and upgrading the plant and machinery in its flour and feed milling and grains trading business, which has been the largest contributor among its core segments generating 61 percent of its total revenue of RM3.7 billion in FY14, as well as its investments in its China associates. In July last year, the firm acquired 2.3ha in Pasir Gudang, Johor where it built a plant for expanding its feed-milling activities, which it expects to be finished by 2017. A second plant has also been commissioned in Vietnam in January.
Significance: The company will be concentrating on expanding in the Klang Valley because its people have the highest disposable income and the admissions it registers there continue to be the highest. Meanwhile, it is expanding its flour and feed milling and grain trading division since it foresees that it will remain the main driver of revenue growth for FY15.
http://www.sharesinv.com
ALAM (5115), DELEUM (5132), PPB (4065)
Alam Maritim Wins Contract From Petronas Carigali
Alam Maritim Resources received a two-year umbrella contract starting from January 2015 for the provision of spot charter for marine vessels from Petronas Carigali for its Malaysian operations, with an option for a one-year extension. The company had won seven of the eight packages which allow it to provide marine vessels.
AmResearch predicts that charter rates in the future will be low since Petronas has started bargaining for lower charter rates as part of its objective of optimising its cost structure, which consists of lowering capital expenditure by 10 percent to 15 percent in the next two years and slashing operating expenditure by 30 percent. However, the research house foresees that there will be a pick-up in earnings momentum in the firm’s offshore, installation and construction division in 2H15 when a RM248 million transport and installation contract secured with MMHE and Technip is executed.
The group plans to go for smaller contracts with higher success rates. To date, it has won an RM30 million contract where the margin was more than 50 percent due to early completion. The group’s order book now stands at approximately RM1.1 billion (excluding the umbrella contract), of which 50 percent are from offshore supply vessels while its tender book stands at RM2 billion.
Significance: AmResearch has maintained its ‘Hold’ rating on Alam Maritim Resources with an higher target price of RM0.67. It did not change its earnings as the value of the umbrella contract has yet to be settled and will depend on the actual number of days the vessels are chartered.
Deleum Maintained At Hold With Lower Target Price
Deleum’s RM3.8 billion order book provides long term earnings visibility as the group’s lengthiest contract extends to 2023, according to AllianceDBS Research. It added that important contracts that will support earnings going forward are the firm’s umbrella contracts for the supply and maintenance of gas turbines (RM2 billion to RM2.5 billion estimated outstanding value), provision of slickline equipment and services (RM750 million estimated outstanding value), and smaller contracts for corrosion control and chemical supplies.
However, with Petronas cutting operating expenditure, the research house anticipates that the growth of the group will be dampened since its contracts are mainly on an on-call basis, especially in the case of the gas turbine contracts, for which there will be lower demand.
That said, the research firm noted that the slickline contract, of which 80 percent of the 55 units rolled out are on a take-or-pay basis, will tide the group through FY15 and predicts that growth in FY15 will be modest at 6 percent before offshore activities normalise in FY16, spurring growth of 11 percent.
Significance: Given the firm’s flat outlook, AllianceDBS Research has retained its ‘Hold’ call on the stock, with a lower target of RM1.60 (based on 10 times FY15 price-to-earnings ratio), after factoring higher interest expenses. Going forward, the research house also expects a healthy dividend yield of 5 percent to help support the shares.
PPB Allocates RM535m For Capex
PPB Group will be allocating RM535 million of capital expenditure over the next two to three years primarily to expand its Golden Screen Cinemas (GSC) chain and grow its flour and feed milling and grains trading business. It is also exploring new markets in South-East Asia and beyond, where it hopes to capitalize on its expertise in milling good flour.
The company will be reserving RM283 million for its film exhibition and distribution division to open 11 new cinemas, upgrade its existing cinema equipment, extend three existing cinemas and possibly increase its investment in Vietnamese company Galaxy Studio Joint Stock Co. It hopes to expand by 100 screens from this year till 2017 and plans to expand its cinema chain’s presence in the Klang Valley.
The firm will be spending RM208 million on expanding and upgrading the plant and machinery in its flour and feed milling and grains trading business, which has been the largest contributor among its core segments generating 61 percent of its total revenue of RM3.7 billion in FY14, as well as its investments in its China associates. In July last year, the firm acquired 2.3ha in Pasir Gudang, Johor where it built a plant for expanding its feed-milling activities, which it expects to be finished by 2017. A second plant has also been commissioned in Vietnam in January.
Significance: The company will be concentrating on expanding in the Klang Valley because its people have the highest disposable income and the admissions it registers there continue to be the highest. Meanwhile, it is expanding its flour and feed milling and grain trading division since it foresees that it will remain the main driver of revenue growth for FY15.
http://www.sharesinv.com
