Wintermar Wrapping Up 2013 With a Bang
We think 4Q13 earnings could bring an upside surprise, following the contribution from its anchor handling tug and supply (AHTS) vessel, which came in 2H13. Given the strong 4Q13 and higher vessel utilization expected in 2014, we raise our FY13-14F earnings by 8-6%. Maintain BUY, with our TP higher at IDR840 (8.5x 2014 P/E) to reflect our earnings adjustments and the narrower discount to its peers.
Fleet grows
Wintermar Offshore Marine added 10 new vessels and scrapped four, bringing total vessels to 71 by the end of last year from 64in 2012 – in line with their strategy of rejuvenating and scaling up its vessel portfolio mix. Part of the vessel expansion was due to strong demand, supported by Indonesia’s cabotage ruling and high offshore vessel demands.
Closing 4Q13 on a positive note
We expect the additional USD40m capex adjustment for vessel expansion back in 2H13 to USD90m (from our previous estimate of USD50m) to boost 2H13 earnings. Therefore, we raise our 2013F earnings estimate by 7.9% (or USD25m). We also increase our 2014F earnings by 6.2%, as our vessel operating days/utilization rate assumptions for its mid- to high-tier vessels rise.
Bullish demand; high entry barriers
We still see bullish demand from the oil & gas offshore blocks for exploration and production activities. Channel checks with several industry players suggest that many players want to enter the offshore support vessel (OSV) industry. However, we conclude that entry barriers will be high if they want to compete with the company, given its long track record/experience with international oil companies and extensive market intelligence to cater to the vessel needs of potential and existing customers.
A potential rerating in the cards
We raise our TP to IDR840 from IDR740, premised on a 8.5x 2014 P/E, which is at a steep 41% discount to its domestic and regional peers. Fundamentals-wise, it has constantly been proven as a solid company – although its liquidity needs to improve to justify a rerating.
