Higher Than Expected Contribution From 3rd Party Chartered Vessels
9M11 bottom line in line, yet top line above our 2011 forecast
Wintermar Offshore Marine, Tbk (WINS IJ) 3Q11 net profit reached IDR28bn (-18% q-o-q & +8% y-o-y), bringing 9M11 net profit to IDR107bn (+46% y-o-y), accounting for 71% to our FY11 forecast and consensus respectively. 9M11 revenue which amounted to IDR760bn (+80% y-o-y) was above our expectation, accounting for 89% of our FY11 forecast mainly due to our unexpected assumption of strong 3rd chartered party vessel revenue despite 10 units of vessels delivery in 9M11. We will adjust our model accordingly partly as to upgrade our 2011 revenue. As per September 2011, WINS has total contracts in hand amounting to USD125m, reflecting a captive contract demand in 2012.
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3Q11 net profit growth decline is mainly caused by FX loss
Amid negative sentiment arising from the European sovereign crisis led to a significant USD strength, which in turn contributes an FX loss amounting to IDR17bn on WINS’ earnings derived from its USD loans. Therefore, despite 3Q11 revenue and operating profit increased 16% and 29% q-o-q respectively, profit before-tax declined quite significantly (-26% q-o-q) stemmed from high FX loss.
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Higher than expected proportion of thin margin business
3Q11 operating margin increased to 19% from 17% in 2Q11 caused by higher proportion of owned vessels in 3Q11 (46%) compared to 2Q11 (43%) which provides substantial higher margin (40%) compared to its 3rd party chartered vessel which has thin margin (3%). We expected higher 2011 margin of 29% compared to 2010 of 27% given our previous expectation of 2 new high end vessels to start operating by 4Q11.
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2 vessel purchases delayed
We expect to lower our 2011 capex assumption given that 2 high-end vessel purchases will be delayed and shifted to 1Q12. It is worth noting that 9M11 net gearing stands at 43%, which leaves ample room for further leverage to be obtained from bank loans to purchase new vessels.
Strong fundamentals support our BUY call
Given the 1.) Positive progress on the cabotage principle, 2.) Strong demand from upstream oil industry activities, 3.) Less sensitive to oil price and 4.) Strong management quality and excellence in service, we maintain our BUY call and in the meanwhile maintain our target price of IDR480. WINS is currently trading at 9x and 7x 2011-12 PE respectively.
