Wintermar A Bright Outlook
WHAT’S BREWING?
Wintermar Offshore Marine (WINS) issued several announcements over the past 1 month, which are i) ordered a platform supply vessel (PSV) for deepwater drilling support, ii) plans to gradually sell off 38 older vessels, and iii) obtained a USD27m loan from Bank Mandiri. We believe strong support from the cabotage ruling has enabled WINS to obtain win contracts, as well as brightened the industry outlook.
OUR TAKE
Buys PSV, sells off old vessels to achieve cost efficiency
WINS acquired its third PSV to provide support services to Indonesia’s deepwater drilling and oil & gas operations. The vessel is expected to operate from June 2012 with a two-year contract worth USD6.5m (IDR56bn) from Total E&P. This is in line with the group’s plan to add 1 PSV this year to add more high-end vessels to its fleet to enable it to charge higher tariffs. Also, WINS has plans to gradually sell 38 vessels worth USD38m with the aim of hiving off low-end/old vessels of lesser value in order to cut operating costs and improve margins going forward.
Moderate gearing; loan attainment on track
In the past one month, WINS has obtained loans worth USD45m, making up 45% of its 2011 target capex of USD100m. Some 70% of the company’s 2011 capex is financed by debt. Note that 55.5% of the USD45m loan is from Bank Mandiri (BMRI), the largest bank in Indonesia in terms of assets. The company acknowledges local banks’ vital role in the offshore support vessel (OSV) industry as it is essential in putting Indonesia’s flagged OSV fleet on firmer footing. We expect its 2011 net gearing to about 60% (revised from 80% as the company will not be paying any dividend this year), which we view as a moderate leverage level.
Won 23 out of 42 tenders, thanks to cabotage ruling
WINS won 23 new tenders worth USD104m from the January to May 2011 period out of the 42 bids it submitted. These contracts range from 1 month to 2 years. However, we have not incorporated these into our model as their date of commencement is yet to be determined, although they should boost WINS’ earnings for 2012-13. Generally, since it takes at least a year to build a vessel, contracts that require new vessels may take longer to become effective. However, a contract that involves the use of existing or third party vessels may commence much earlier.
Cheap valuation; positive long-term outlook
We maintain our target price at IDR480 while WINS is currently trading at 8x and 6x 2011-12 PE, or a 50% and 55% discount to the market PE. We see financial institutions and government support through cabotage, as well as a trend towards offshore oil & gas production as positive catalysts for the offshore support vessel industry. Inevitably, WINS also stands to gain from these positive developments.
