Monday, 7 April 2014

Alam Maritim plans to acquire mother ship to support deepwater push

Shaharuddin (left) and Alam Maritim chief financial officer Soffan Affendi Aminudin viewing a model of a diving support vessel.

Alam Maritim Resources Bhd hopes to capture a bigger slice of the RM2bil market for underwater inspection, repair and maintenance (IRM) work with the planned acquisition of a US$80mil (RM262mil) modern diving support ship.

Group executive director and chief operating officer Shaharuddin Rahmad said the company had already identified the target vessel, which it intended to operate with a joint-venture partner.

“The ship will be a big boost to our subsea capabilities,’’ he told StarBiz in an interview last week.

Alam Maritim owns and operates a fleet of underwater work class remotely operated vehicles (ROVs) that can dive to the depth of 3,000m.

These underwater robots can be deployed from its current fleet of offshore support vessels (OSVs), but the planned acquisition of a diving support ship for the ROVs will enhance its operational capabilities.

“Having our own ship will give us a lot of flexibility to improve our margins,’’ he said.

The targeted diving support vessel, with its dynamic positioning capabilities, will give Alam Maritim the advantage of being the only local company with a modern ROV launch vessel.

“There is tremendous demand for subsea IRM services, not only in the oil and gas industry, but also in the telecommunication industry,’’ Shaharuddin said.

In the oil and gas industry, ROVs are typically used in drill support activity and the installation of subsea infrastructure, as well as for search and exploration activities.

Alam Maritim’s ROVs were also used to install anchors for a subsea water pipeline project between Turkey and Cyprus and carry out inspection and repair works for China Telecom Corp Ltd.

The group’s subsea division generated revenue of about RM100mil in the last financial year ended Dec 31, 2013 (FY13), but margins were tight due to high operating cost.

Shaharuddin said this was because the company had to incur expensive third party charters for specialised vessels that it needed to launch the ROVs for deepsea work.

“Buying the ship will represent our biggest push in this segment,’’ he said.

The company had already lined up the financing needed to pay for its portion of the ship, and this might include a combination of loans and a new share sale exercise, he said, adding: “We are looking at various options available to us.”

Currently the group’s ROVs, which is housed under Alam Subsea Pte Ltd, are based in Singapore.

“Being based in Singapore has it own advantages, but we intend to relocate the ROV facility to Iskandar Malaysia in the near future as we continue to grow our business,’’ Shaharuddin said.

Alam Maritim reported a revenue of RM432.88mil and a net profit of RM80mil, or 10.1 sen a share in FY13.

The bulk of Alam Maritim revenue and earnings comes from its OSV division, which has an order book of RM1.2bil. The company has a fleet of 42 OSVs of various sizes and functions.

Alam Maritim is rated a “buy” at CIMB Research, with a target price of RM2.00.

The firm said a key re-rating catalyst for the stock was rising charter rates, which had increase to US$2 per bhp in the fourth quarter of 2013 from US$1.80 a year ago.

The firm’s analyst, Norziana Mohd Inon, expects Alam Maritim’s earnings to grow to RM96.2mil, or 12 sen a share, in FY14.