Wintermar Growing From Strength-to-Strength

Company background
Wintermar Offshore Marine (WINS) is owned by the Layanto family and has been providing upstream services for the oil & gas sector for more than 40 years. It was established under the name of Swakarya Mulia Shipping in 1995 and subsequently, changed its name to WINS. In that year, WINS won its first tender from Chevron and since then, it has continuously obtained certifications to increase its quality standards.

What sets WINS apart from its local peers is the provision of additional services (heterogeneous), such as catering, crew recruitment and training, thereby becoming a “one-stop shop”. As a result, the company has been able to maintain good long-term relationships with its clients.

Long-term contracts a shield against market volatility
WINS recently obtained a 5-year contract deal worth USD19m with CNOOC to supply three fast utility vessels (FUV) to be used in 2013. This is on top of a 2-year contract with Pertamina Hulu Energy West Madura worth USD11m, a 3-year contract with West Natuna Transportation worth USD12m, a 5-year contract with Kaltim Prima Coal (KPC) worth USD18m and a 2-year contract with E&P Indonesia worth USD7m – all of which were announced in 2H11. All these contracts demonstrate a shift of its clients’ preference towards long-term contracts (previously its contract were under 1 year on the average), which provide a cushion in the form of stable recurring income.

3Q11 updates
WINS’ 3QFY11 net profit reached IDR28bn (-18% q-o-q and +8% y-o-y), bringing its 9MFY11 net profit to IDR107bn (+46% y-o-y), which account for 71% of our and consensus full-year FY11 forecasts. Its unrealized contracts as at 30 Sept 2011 are USD125m, which portends a potentially captive contract-demand going forward. As at end-Sept 2011, WINS has a total of 65 vessels, which include the 10 vessels purchased this year. Note that its initial vessel purchase target was 12 this year, which means that the purchase of two high-end vessels will be postponed to 1QFY12.

Cabotage is still an upside catalyst
We see progress in WINS’ cabotage business, given that a large number of foreign vessels now have to renew their licenses every three months, despite having long-term contracts in Indonesia. Yet, the number of foreign-flagged vessels has risen in the short term to maintain their utilization rates, as there were 111 foreign flagged-vessels in July 2011 vs only 63 in February 2010.

Given WINS’ strong ties with BP Migas and government regulators via its affiliation with the Indonesian Shipowners Association (INSA), we believe it will gain from the synergies arising from the common goal of deploying more Indonesian-flagged vessels for offshore support.

Attractive valuation
We maintain our BUY call with a Target Price of IDR480, implying a 2012f target PER of 9x. WINS is currently trading at a 2012f and 2013f PER of 6.4x and 5.7x respectively.