Wintermar in Line; A Further Re-rating

1Q14 net profit reached USD8m (-12.9% q-o-q; +30.5% y-o-y), which is in line accounting for 22% to our FY14 net profit. We believe WINS should be rated against its peers in South-East Asia which benefit from the cabotage or local content ruling. Therefore, We upgrade our TP to IDR1,200 (from IDR1,000) with a target PER of 12x (previously 9.4x) premised on the sector’s strong growth (multi-year boom and better industry visibility. BUY.

1Q14 highlight
WINS 1Q14 revenue reached USD46m, down 18% 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 WINS’ higher-tier vessels with higher margin has increased to its fleet portfolio, WINS 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%. This brings gross profit to slightly increase by 1.8% q-o-q amounting to USD17m. In 1Q14, total asset increased to USD466m from USD422m in 2013. Net gearing increased to 76.2% in 1Q14 compared to 59.3% in 4Q13.

3 additional vessels ytd
On a year-to-date period, WINS has already acquired 3 new vessels which are mix of mid-high tier vessels. We expects WINS to acquire another 2 mid-tier vessels to come in later in 2H14 with total FY14 vessel expansion capex of USD60m.

More big O&G projects post-election period. We expect several major oil and gas projects which needs to be approved by the government to be delayed in 1H14 given the focus on Presidential election. However, we expect continuous exploration projects activities and expect more oil and gas activities post election period.

Upgrade TP to IDR1,200; BUY
We believe WINS should be rated against its peers in South-East Asia which 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 upgrade our TP to IDR1,200 (from IDR1,000) with a target PER of 12x (previously 9.4x) premised on the sector’s strong growth (multi-year boom and better industry visibility.

3% private placement slight dilution to shares
WINS plans to have a private placement to several investors at IDR800/share, 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 on-going vessel expansion going forward which is positive in our view. This translating to 9.8x 2014 PER post dilution from our current 9.5x 2014 PER.