Wintermar 1Q14 In Line – Bright Years Ahead
1Q14 earnings reached USD8m (-12.9% q-o-q; +30.5% y-o-y), in line with our expectations (22% of our FY14 estimate). We believe the company should be rated against its regional peers, which benefit from the cabotage or local content ruling. We increase our TP to IDR1,200 with a target PER of 12x (previously 9.4x), premised on the sector’s strong growth (multi-year boom) and better industry visibility. Maintain BUY.
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1Q14 highlight
Wintermar Offshore Marine’s 1Q14 revenue reached USD46m, down 18.6% q-o-q mainly due to lower revenue from its own vessels (-12.7% q-o-q) and lower 3rd party chartered vessels (-27.0% y-o-y). As it added more higher-tier vessels (giving higher margin) to its fleet portfolio, 1Q14 own vessel margin improved to 57.5% from 54.3% in 4Q13. Meanwhile, its 1Q14 3rd party chartered vessel gross margin improved to 8.8%, from 7.8%, bringing gross profit 1.8% higher q-o-q to USD17m. In 1Q14, total assets increased to USD466m, from USD422m in 2013. Net gearing increased to 76.2% in 1Q14, vs 59.3% in 4Q13.
Wintermar Well In Line; Strong Earnings Upgrade
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Three additional vessels YTD
On a year-to-date period, Wintermar Offshore Marine has already acquired three new vessels, which are a mix of mid- to high-tier vessels. We expect it to acquire another two mid-tier vessels to come in 2H14, with total FY14 vessel expansion capex of USD60m.
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Upgrade TP to IDR1,200; BUY
We believe Wintermar Offshore Marine should be rated against its peers in Southeast Asia that benefit from the cabotage or local content ruling, as these companies enjoy higher vessel charter rates, stronger fleet utilization, favorable reinvestment opportunities and higher earnings visibility. We raise our TP to IDR1,200 (from IDR1,000) with a target PER of 12x (vs 9.4x), premised on the sector’s strong growth (multi-year boom) and better industry visibility.
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3% private placement a slight dilution to shares
Wintermar Offshore Marine plans to have a private placement to several investors at IDR800/share and at a 17.1% discount to its current share price level. The new shares issuance will be executed on 6 May 2014. The placement should loosen up its geared up balance sheet to prepare for ongoing vessel expansion, going forward – which is positive in our view. This translates to 9.8x 2014 PER post dilution from our current 9.5x 2014 PER.
