Logindo Samudramakmur In Line; Set to Experience Multi-year Boom

1Q14 net profit increased hit USD6m (+9.6% q-o-q; +62.2% y-o-y), which is inline accounting 25% to our FY14 net profit. We see more contribution from other customers besides Total E&P which is positive in our view. Logindo recently signed a 2 year long-term contract with its Pertamina Hulu Energi, which is a sign of better earnings quality to its fleet contracts. We increase TP to IDR4,900 with 12x target PER premised on the sector’s strong growth & better industry visibility.

1Q14 highlights
1Q14 revenue reached USD18m, up 6.5% q-o-q driven by its own-vessel revenue. Gross profit margin fell to 52.2% compared to 56.6% in 4Q13 given the lag time between vessel purchases and the operating time which causes a slight numb in depreciation and crew costs and also higher fuel cost component given its slight exposure to spot charters. However, given economies of scale from its vessel expansion to higher tier vessels, opex to sales ratio fell to 9.3% in 1Q14 from 13.7% in 4Q13, bringing operating margin to 42.8% in 1Q14 from 43.0% in 4Q13.

Most projects coming outside Total E&P
We see that Logindo is spreading its wings to other O&G contractors besides Total E&P. One such significant customer is Pertamina Hulu Energi (PHE) seen by its revenue from PHE increased 159.% y-o-y in 1Q14.

2 new vessels came in
Year to date, Logindo purchased 2 AHTS vessels with both 8000 hp serving 2 of its big clients Total E&P and Pertamina Hulu Energi (PHE) with capex for both vessels worth USD40m. We expect 2 other vessels to come in later mid of this year, bringing total capex for this year amounting to USD80m.

Upgrade TP to IDR4,900; BUY
We raise our TP to IDR1,200 (from IDR1,000) with a target PER of 12x (vs 9.4x) which is at par with Wintermar Offshore Marine (WINS IJ; BUY; TP:IDR1,200), premised on the sector’s strong growth (multi-year boom) and better industry visibility. We suggest that domestic investors’ knowledge regarding the strong potential of Indonesia OSV industry has increased compared to the last couple of years, hence we suggest liquidity on these stocks to improve.