Alam Maritim – No longer underwater. After two straight quarters of losses, new contracts enabled Alam to return to the black in 2Q11 with a net profit of RM7m that allowed the company to break even in 1H11. We consider the performance to be broadly in line as we anticipate a stronger recovery in 2H11. Three of Alam’s vessels are poised to land three new contracts worth no less than RM200m. The company is also hopeful of winning a US$36m SOGT pipe installation contract.
We maintain our forecasts and target price of RM1.40 as we continue to value Alam at 11.6x P/E or a 20% discount to our target market P/E of 14.5x as the marine support segment is still on the path of recovery. The stock remains a BUY in view of the potential share price triggers of 1) a stronger-than expected turnaround, and 2) more contract awards.
Supermax Corporation – Losing its grip in the 2Q. Supermax’s 1H11 net profit was below expectations, making up 30% of our full-year forecast and 29% of consensus estimates. The poor results were due to higher input costs and overcapacity. As expected, no dividends were declared.
We now slash our FY11-13 EPS numbers by 13-26% as we were overoptimistic about Supermax’s ability to pass on costs and maintain margins. Supermax has put its Glove City project on hold, which we believe curbs its growth prospects. As a result, we raise our discount to Top Glove’s 13.1x benchmark P/E from 20% to 25%. Our target price falls from RM4.75 to RM3.64, prompting a downgrade of Supermax from Buy to HOLD. While valuations are cheap and input costs have moderated, this is offset by a lack of catalysts and lower growth prospects. We recommend Kossan for its balanced product mix.
We maintain our forecasts and target price of RM1.40 as we continue to value Alam at 11.6x P/E or a 20% discount to our target market P/E of 14.5x as the marine support segment is still on the path of recovery. The stock remains a BUY in view of the potential share price triggers of 1) a stronger-than expected turnaround, and 2) more contract awards.
Supermax Corporation – Losing its grip in the 2Q. Supermax’s 1H11 net profit was below expectations, making up 30% of our full-year forecast and 29% of consensus estimates. The poor results were due to higher input costs and overcapacity. As expected, no dividends were declared.
We now slash our FY11-13 EPS numbers by 13-26% as we were overoptimistic about Supermax’s ability to pass on costs and maintain margins. Supermax has put its Glove City project on hold, which we believe curbs its growth prospects. As a result, we raise our discount to Top Glove’s 13.1x benchmark P/E from 20% to 25%. Our target price falls from RM4.75 to RM3.64, prompting a downgrade of Supermax from Buy to HOLD. While valuations are cheap and input costs have moderated, this is offset by a lack of catalysts and lower growth prospects. We recommend Kossan for its balanced product mix.
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