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.
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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