Radiant Utama Interinsco Cheap within an Attractive Industry

Highlights
Potential tenders with commencements in 4Q13
RUIS is in tender process to supply Floating, Storage and Offloading Unit (FSO) service for CNOOC which will start operating in 4Q13. Given RUIS highly leveraged position (net gearing at 223% in 2012), RUIS can only use a re-chartered vessel scheme with foreign partnership. The deal would command USD34,600/day worth of tariff and RUIS will take 2.5% re-charter commission.

Furthermore, RUIS is in tender process to supply Floating, Production, Storage and Offloading Unit (FPSO) service for Santos and to commence in 4Q13 with a partnership scheme as well. The commanded rate would be at USD30-35k/day and a 5% re-charter commission to RUIS.

78% revenue secured this year
RUIS has solid current back-log for 2013 amounting to IDR1.4trn. Around 78% of 2013 revenue target is secured. We believe new tenders would be obtained in 2014 which will partially boost our 2014 revenue by 15% y-o-y. The management expects more potential tenders to come.

Heavy debt in balance sheet = Ambitious but reasonable. We see risk of funding limitations for them to acquire heavy assets such as vessels. However, expected positive operating cash flow in 2013 and 2014 should lighten its burden. We expect net gearing to fall to 171% in 2014 from 184% in 2013.