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Tuesday, August 23, 2011


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.

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