Wintermar in Line; A Lift From A Benchmark Upgrade

FY11 bottom line to IDR132bn (up 25% y-o-y), accounting for 99% and 92% to our and consensus. Outlook remains solid. The counter is trading at 10x and 8x 2012-13 PER, a 41% and 39% discount to the sector respectively. Hence we increase our target price to IDR540 based on an implied target PER of 12x with a BUY recommendation.

Revenue above expected, yet cost of revenue spiked
FY11 revenue was 12% above our target amounting to IDR1,024bn (+53.2% y-o-y) as WINS received many contracts ever since the cabotage ruling which leans towards favoring the domestic vessels, such as WINS. However, it is worth noting that due to limited vessels WINS possesses at this current level (more than 60 vessels), WINS revenue in re-chartering business spiked in 2011 (~3% margin business way lower compared to using own vessels which has gross margin of ~40%) which leads to higher cost of revenue (+57.8% y-o-y), which in turn obtains a gross margin squeeze from 26.8% in 2010 to 24.6% in 2011.

Non-cash item lead earnings below management’s initial target
Wintermar Offshore Marine (WINS) 2011 results ended below the management’s initial target partly due to non-cash item accounts as we have mentioned this in our previous report back in January 2012. On the bright side, core profit was delivered. Outlook still remains solid. It is worth noting that WINS suffered a IDR20bn forex gain/loss in 4Q11 as the company obtained hefty USD debt at an unfavourable exchange rate of IDR8,500.

Stable earnings and higher demand ahead
Wintermar Offshore Marine (WINS) recently obtained BP Berau’s tender worth USD56m to supply 2 Anchor Handling Tug Supply (AHTS) size 8,000 BHP and 1 unit of Drilling Support Warehouse Barge (DWSB). The vessels will be financed by loan and internal cash. The task given by BP Berau will start 2H12 – 2014.

This is the first time WINS to possess a 8,000 BHP vessel in its portfolio, showing its commitment to shift its portfolio into high value vessels as to facilitate the demand in the oil & gas offshore blocks and is a testament of stable earnings going forward as the company plans to obtain more long-term contracts on its portfolio.

Outlook remains healthy despite a decline in global outlook
Oil price has maintained above USD100/barrel, which could lead to higher capex for oil majors, hence whispering positive signals to OSV demand in offshore blocks.

Valuation
We increase our target price IDR540 (from IDR480) with an implied 12x target PER, which is reasonable in our view as its current 2012 PER of 9.7x is still 41% discount to the sector. BUY.