Wintermar FY13 Earnings May Surprise
We think WINS’ 4Q13 earnings could be poised for an upside surprise, bolstered by contributions from its anchor-handling tug and supply (AHTS) vessels in 2H13. In view of the strong 4Q13 and higher vessel utilisation expected for 2014, we raise our FY13-14F earnings estimates by 8-6%. Maintain BUY, with our TP lifted to IDR840 (8.5x 2014 P/E), to reflect our earnings adjustments and a narrower discount to its peers.
Background
Wintermar Offshore Marine (WINS) has been involved in marine transportation since 1970. It also provides fleet support to the upstream activities of offshore companies. WINS’ clients are oil & gas giants such as Chevron, Exxon Mobil and Conoco Phillips. The company added 10 new vessels and scrapped four, bringing its total vessels to 71 at end-2013 from 64 in 2012 – in line with its strategy of rejuvenating and scaling up its vessel portfolio mix. Part of its vessel expansion was due to strong demand, supported by Indonesia’s cabotage ruling and high offshore vessel demand.
Outlook
We still see bullish demand from the oil & gas offshore blocks for exploration and production activities. Channel checks with several industry players suggest that many players want to enter the offshore support vessel (OSV) industry. However, we conclude that the entry barriers for these companies will be high, given that WINS has a long track record/experience in dealing with international oil companies and extensive market intelligence on the vessel needs of potential and existing customers.
Latest development
SKK Migas expects O&G investments to surge 32.6% y-o-y to USD25.6bn this year to cope with the decline in oil production over the last few years. This would benefit WINS as its vessels cater to exploration and production activities.
Valuation
We have a BUY on the stock, with an IDR840 TP, premised on an 8.5x 2014 P/E, which is at a steep 41% discount to its domestic and regional peers. Fundamental-wise, WINS has constantly proven itself to be a solid company, although its liquidity needs improving in order to justify a re-rating.
