ASL Marine - Quick off the mark

ASL Marine delivered a sterling 1Q as all its three business arms performed well. We expect ASL to continue making strides as higher-value shipbuilding projects are recognised in subsequent quarters. Quarterly earnings momentum and strong orders could catalyse the stock.

At 37% of our FY12 forecast, 1Q core earnings were 48% above our expectations while reported earnings formed 23% of Bloomberg consensus. However, we retain our estimates as we are only in 1Q. We reiterate our Outperform call and raise our target price as we roll it forward to 0.9x CY14 P/BV, its 5-year mean.

All segments delivered
Core earnings shot up 180%, thanks to better gross margins across all three business segments (see overleaf for details). This is despite S$2.3m doubtful debt allowances for long outstanding amounts owed by several customers for ship repair works provided in previous years. Reported earnings were dragged down by S$4.5m FX loss due to its US$ and Rp-denominated receivables as both currencies weakened against S$.

Yard fully utilised; orders to flow from 2013 onwards
The order book dropped slightly to S$573m from S$586m at end-FY12. As yard slots are fully utilised till end-2013, ASL will only start booking orders early next year. We expect S$250m order intake for FY13.

Scaling up the value chain
ASL has entered into a conditional agreement to acquire a Dutch company, Vosta LMG International B.V (Vosta) for €5.1m or S$8m. Vosta is a leading dredging engineering and contracting company. It also makes a wide range of dredging component packages. 

Although it is unprofitable, we view the acquisition positively from a strategic perspective. Vosta’s technical know-how will complement ASL’s shipbuilding operations as ASL is currently a dredger with value of S$150m in excess for delivery by end-2014. It will also enable ASL to vertically integrate and scale up the value chain. (Read Report)

Source : CIMB Research

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