Wintermar Smooth Sailing Ahead
9MFY11 profit in line; top-line above our 2011 forecast
Wintermar Offshore Marine’s (WINS IJ) 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), accounting for 71% of our and consensus FY11 forecasts respectively. The 9MFY11 revenue of IDR760bn (+80% y-o-y) was above our expectation, making up 89% of our FY11 forecast, mainly due to higher-than-expected third-party chartered vessel revenue despite the delivery of 10 vessels in 9MFY11. We will adjust our model accordingly in view of our FY11 revenue upgrade, yet maintain our bottom line level. As at end-Sept 2011, WINS had totaled contracts in hand worth USD125m, which portends a potentially captive contracts demand in 2012.
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3Q11 net profit growth drops mainly due to FX loss
Negative sentiment arising from the European sovereign debt crisis led to significant USD strength, which in turn caused WINS to suffer a forex loss of IDR17bn, which affected its earnings derived from its USD loans. As a result of the high FX loss, even with 3QFY11 revenue and operating profit increasing 16% and 29% q-o-q respectively, the profit before-tax was down quite significantly (-26% q-o-q).
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Higher-than-expected margin seen
3QFY11 operating margin widened to 19% from 17% in 2QFY11, attributed to a higher proportion of owned vessels used in 3QFY11 (46%) compared to 2QFY11 (43%), as such vessels fetch a substantially higher margin (40%) compared to its third-party chartered vessels, which yield only a slim margin of 3%. We expected a higher 2011 margin of 29% compared to the 2010 margin of 27%, given our earlier expectation that two new high-end vessels will start operated by 4QFY11.
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Delay in purchasing two vessels
We expect to lower our 2011 capex assumption given that the purchase of two high-end vessels will be postponed to 1QFY12. It is worth noting that the company’s 9MFY11 net gearing stood at 43%, which leaves ample room for further leveraging by obtaining standby bank loans facilities to purchase new vessels.
Strong fundamentals support our BUY call
Given that: (i) the company has achieved positive progress riding on the cabotage principle, (ii) it is enjoying strong demand from upstream oil industry activities, (iii) its profit is less sensitive to oil prices, and (iv) it has a strong management that be committed to service quality and excellence, we maintain our BUY call and our target price of IDR480 on WINS. The company is currently trading at a FY11F PER of 9x and FY12F PER of 8x.
