Wintermar Potential Upside From New Tenders
We upgrades by 6% our earnings target for 2011 to IDR153bn (+44% y-o-y) on the back of a share of net income from its associate Fast Offshore Supply (Singapore) amounting to IDR24bn (based on the company’s guidance). We like WINS’ efficient spending of its 2011 capex on vessel expansion this year (12 added vessels) as 45% was used to buy 6 vessels in 1H11. We view WINS’ strategy to not pay dividends this year for 2010 as a wise move given its current focus on propelling its business.
Wintermar Officially Acquired 51% Fast Offshore
Difference between WINS and TRAM
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On a brighter note, we expect WINS to distribute a 20% dividend payout next year based on this year’s stellar performance. We like the stock’s: i) strong base of clients, ii) strong market demand, especially since the implementation of cabotage regulations, and iii) its ability to book strong earning’s growth amid rising oils prices and declining oils production.
Potential upside from 42 upcoming tenders
WINS is currently negotiating for 42 contracts worth USD300m, ranging from 1 to 5 years. We believe these contracts provide upside potential for 2011 earnings should WINS secure the tenders this year as our 20% y-o-y revenue growth assumption only takes into account the company’s existing contracts.
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Oil production decline not a hurdle
Given its unique market position and the certificates and reference it has garnered from top global oil producers such as Exxon Mobil, Chevron & Conoco Phillips, WINS was able to book a CAGR of 39.7% from 2004 to 2010 amid rising oil prices and a downtrend in oil & gas production. Furthermore, we believe the cabotage ruling would benefit WINS regarding securing more contracts gone forward.
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Earnings revisions; 2011 earnings to boost 45% y-o-y
We upgrades by 6% our earnings target for 2011 to IDR153bn (+44 % y-o-y) on including WINS’ share of net income from its associate Fast Offshore Supply (Singapore) amounting to IDR24bn (based on the company’s guidance). We believe this may turn outed to be a solid investment given that WINS is investing in a business where it knows well given its 40 years’ experience in the industry.
Still a BUY
We maintain our BUY call with a target price of c, translating into an implied targeting of 11x 2011 PE, providing a 45% upside potential. The stock’s key risks are: i) changes in charter rates, ii) delays in contracts, iii) risk of obtaining loans for its vessel purchases.
