Wintermar Solid Fundamentals

Company background. WINS is owned by the Layanto family and has been providing upstream services for the oil & gas sector for more than 40 years. The company was legally established under the name of Swakarya Mulia Shipping in 1995, and then the company changed its legal name to Wintermar Offshore Marine.

In the same year, WINS won its first tender from Chevron. Ever since then, WINS has continuously obtained certifications as to increase its quality standards. What sets WINS apart from its local competitors is that the company offers additional services (heterogeneous) such as providing catering, crew employment and training to become a “one stop shop”. As a result, WINS has been able to maintain good long-term relationships with its clients.

Long-term contracts obtained are a defensive shield towards volatilities
WINS recently obtained a 5 year contract deal worth USD19m with CNOOC to supply 3 fast utility vessels (FUV) which will be used in 2013. Coupled with a 2 years contract worth USD11m with Pertamina Hulu Energy West Madura, 3 years contract with West Natuna Transportation worth USD12m, 5 years contract with Kaltim Prima Coal (KPC) worth USD18m and a 2 years contract worth USD7m with E&P Indonesia which were all announced in 2H11, is a testament to how its clients are shifting towards long-term contracts (previously was under 1 year on average), which provides a cushion for a more stable recurring business.

3Q11 updates
WINS 3QFY11 net profit reached IDR28bn (-18% q-o-q and +8% y-o-y), bringing its 9MFY11 net profit to IDR107bn (+46% y-o-y), accounting for 71% of our and consensus FY11 forecasts respectively. WINS’ unrealized contract as at 30 September 2011 is USD125m, which portends a potentially captive contract demand going forward. As of 30 September 2011, WINS has in possession 65 vessels which includes the 10 vessels purchased this year. Note that WINS’ initial purchase target was 12 vessels this year, however purchases of 2 high-end vessels will be postponed to 1QFY12.

Cabotage is still an upside catalyst
We see progress in WINS’ cabotage business given that a large number of foreign vessels now have to renew their licences every three months despite having long-term contracts in Indonesia. Yet, the number of foreign-flagged vessels has risen in the short term to maintain their utilization rates as there were 111 foreign flagged-vessels in July 2011 vs only 63 in February 2010.

Given WINS’ strong ties with BP Migas and government regulators via its affiliation with the Indonesian Shipowners Association (INSA), we believe the company will gain from the synergies arising from the common goal of deploying more Indonesian-flagged vessels for offshore support.

Valuation
We maintain our BUY call with TP IDR480, implying a 2012 target PER of 9x. WINS is currently trading at 7x and 6x 2012-13 PER respectively.