Wintermar Wider Gross Margin Lifts Profits
Wintermar Offshore Marine, Tbk (WINS IJ) recently released its 1H12 results, which it stated in USD. The company booked USD10m in 1H12 net profit (+52.7% y-o-y) which was in line with expectations, accounting for 47% and 51% of our and consensus’ full-year forecasts respectively. The strong growth was mainly due to an expansion in gross margin to 32% from only 23% in 1H11, largely caused by an increase in revenue (+7.4% y-o-y) and a decline in cost of revenue (-4.0% y-o-y).
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As we stated in our previous note, we like WINS’s switch to USD currency reporting as this will smoothen the severe earning’s volatility from forex gain/loss, and better reflects the group’s operating conditions. The stock is currently trading at 7x and 5x 2012-13 PERs. We maintain BUY, with a target price of IDR690.
Mission to wean off 3rd party vessel earnings on track
WINS’ aim to rely less on earnings contributions from third party chartered vessels remained on track given the stronger revenue proportion of 57% from owned vessels in 1H12 compared to 44% in 1H11. Revenue from third party chartered vessels shrank 23% y-o-y in tandem with the declining number of foreign chartered vessels due to the implementation of the cabotage policy in Indonesia.
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Gross margins from the company’s owned vessels in 1H12 widened to 49% from 44% in 1H11 given that there were no start-up costs for its new vessels during the period under review. Meanwhile, the company’s opex increased 12% y-o-y, mainly due to higher employee costs and costs related to the setting up of a vessel team in preparation for the several high-end vessels joining its fleet in 2H12.
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Update on WINS’s strategy
WINS plans to issue USD10m worth of convertible bonds in 1H12 in anticipation of new projects. The company is currently participating in several large concession tenders in relation to new deep water exploration. In view of its low 1H12 net gearing level of 37.1%, as well as It’s increasing earnings and operating cash flow, we believes that further leverage is still healthy.
Valuation. WINS is currently trading at 7x and 5x PERs for 2012f and 2013f respectively. Our earnings forecast for 2012 and 2013 are 10% and 7% above consensus estimates respectively. We maintain our BUY call, with a target price of IDR690.
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