Wintermar A Positive Signal
Wintermar Offshore Marine (WINS) plans to have a non pre-emptive rights issue via convertible bonds and ordinary shares amounting to 340m shares, which is 9.56% of its enlarged equity. The convertible bonds issuance amounts to IDR95bn (IDR500/share; 190m shares) while the new shares amounting to IDR69bn (at least IDR461/share; 150m shares), bringing total funds of IDR164bn, which is 12.8% of its enlarged equity.
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Wintermar Positive Outlook
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The convertible bonds has a 3 year period with fixed interest at 5% per year before it could be converted into equity. WINS stated that the proceeds would be used to expand the company’s fleets for 2012 – 2014. It is worth noting that WINS added 13 vessels amounting to USD70m in 2011, bringing total vessels to 67 in 2011. WINS will hold an EGM on 26 June to obtaining approval for the plan.
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Our take?
This is in line with our expectation for WINS to use other channels to raise funds besides bank loans. We believe this rights issue plan is positive for WINS as to capture the cabotage momentum and the strong opportunity to obtain mid-high end vessels to cater oil & gas project demands from offshore blocks.
Scenario analysis
If the plan is realized, WINS may suffer a IDR45bn addition of interest expense per year based on our calculation which could downward pressure our net profit assumption to IDR187bn (-9%) and IDR229bn (-14%) in 2012 and 2013. However, we have not obtained any latest data regarding WINS revenue projections of new vessels to be acquired in 2013 and 2014 so it might be too early to take any stance. Following the net profit decline from higher interest expense, we provide two scenarios undertaken regarding the dilution of shares:
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Scenario 1: WINS shares would be diluted based on its normal rights issue portion excluding the convertible bonds as the convertible bonds would be converted 2 years after the issuance. Thus, with 150m new shares (4% of total outstanding shares), 2012 and 2013 EPS would decline to IDR51/share (-12%) and IDR62/share (-17%) for 2012 and 2013. This translates to 8x and 7x 2012-13 PER.
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Scenario 2: WINS shares would be diluted based on its total non-preemptive rights issue plan amounting to 340m shares, which brings EPS to IDR48 (-17%) and IDR59 (-21%) for 2012 and 2013. This translates to 9x and 7x 2012-13 PER. WINS is currently trading at 7x and 6x 2012-13 PER, which is still relatively cheap compared to its peers. We maintain our earnings forecast at this current juncture and will revisit our model. We maintain our BUY call with TP IDR690.
