Logindo Samudramakmur 1Q14 In Line

1Q14 net profit rose to USD6m (+9.6% q-o-q, +62.2% y-o-y), or 25% of our FY14 estimate
Looking ahead, we expect more contribution from other customers besides Total E&P. Logindo has signed a two-year long-term contract with Pertamina Hulu Energi – a sign of better fleet contracts earnings quality. We raise TP to IDR4,900, with 12x target PER premised on the sector’s strong growth and 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% vs 56.6% in 4Q13, given the lag time between vessel purchases and the operating time. This causes a slight increase in depreciation and crew costs and also a 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), evidenced by revenue from the same rising 159.0% y-o-y in 1Q14.

Two new vessels came in
Year to date, Logindo has purchased two anchor handling tug supply (AHTS) vessels. Both are 8,000hp, serving Total E&P and Pertamina Hulu Energi, with capex for both vessels worth USD40m. We expect two other vessels to come in later mid-2014, bringing total capex for this year to USD80m.

Upgrade TP to IDR4,900; BUY
We raise our TP to IDR4,900 (from IDR3,850) 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’s offshore supply vessel (OSV) industry has increased compared to the last couple of years, hence we suggest liquidity on these stocks could improve.