Wintermar Well In Line; Strong Earnings Upgrade
1Q12 net profit reached IDR39bn (+51.4% q-o-q; -12.7% y-o-y), accounting for 24% and 21% of our and consensus estimates respectively. Wintermar Offshore Marine, Tbk (WINS IJ) revenue, operating and pre-tax level are all in line to our and consensus estimates. We upgrade our earnings by 28% and 36% for 2012 and 2013 respectively to factor in the unexpected new vessels to come in 2H12. We increase our target price to IDR690, translating to a 44% upside potential. As at 28 March 2012, the total contracts on hand are USD172m, higher compared to USD119m in 2011.
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High margin due to higher proportion in owned vessel
Despite a 5.8% q-oq decline in revenue, gross profit spurred 24.6% q-o-q. This is due to strong contribution from owned vessel and lower contribution from 3rd party chartered vessels which has very thin margins. 1Q12 gross margin hit 33.7%, which is the highest since IPO. We believe this would be a testament of a shift in their business model to higher value vessels that commands higher charges. 1Q12 pre-tax profit increased 67.2% q-o-q mainly due to lower forex loss of IDR10bn compared to IDR20bn in 4Q11. 1Q12 net profit reached IDR39bn (+51.4% q-o-q and -12% y-o-y).
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Shiny outlook
Currently WINS is participating several tenders in offshore projects in Eastern part of Indonesia. As at 28 March 2012, the total contracts on hand are USD172m, higher compared to USD119m in 2011. We believe there is abundant of opportunity in the offshore blocks as WINS is just getting a tip of the water.
Strong earnings upgrade
We upgrade our earnings mainly due to higher owned vessels and lower contribution in 3rd party chartered vessels, which is very sensitive to our earnings upgrade. We believe the total contracts at hand (USD172m) and a persistent prolonged earnings growth story for WINS should allow for WINS to leverage even further. Note that we expect 2012 net gearing to be at 46%.
Valuation
We upgrade our target price to IDR690 from IDR540, implying a target PER of 12x, which is still a 28% discount to its peers’ 2012 current PER of 17x. It is worth noting that WINS share price has rose 45.5% YTD, outperforming the market by 35.7%. BUY.
