Among the various offshore and marine stocks, ASL Marine (ASL) is one of the counters with a more diversified business model. Its shipbuilding operations accounted for 46% of gross profit in 9MFY13, ship-repair and conversion accounted for 22%, while ship-chartering contributed 32%. The group expects the outlook of the offshore and marine industry for this year to be “good”, but margins may be impacted by stiffer competition from Chinese shipyards. The long-term future of ASL looks bright, but more time would likely be needed for significant earnings growth and a re-rating of the stock. In particular, the liquidity of the stock is relatively low, partly due to the free float of ~37.8%. We last rated ASL a Buy with a fair value estimate of S$0.86. Due to a re-allocation of internal resources, we are ceasing coverage on this counter.
Diversified business with three core business pillars
Among the various offshore and marine stocks, ASL Marine (ASL) is one of the counters with a more diversified business model. Its shipbuilding operations accounted for 46% of gross profit in 9MFY13, ship-repair and conversion accounted for 22%, while ship-chartering contributed 32%. In Dec last year, it acquired VOSTA LMG for about 5m euros, and the group now has an “engineering” division, which brought in S$13.0m in revenue in 3QFY13.
Positive outlook, but competition stiffer
ASL Marine expects the outlook of the offshore and marine industry for this year to be “good”; utilization and charter rates for AHTS and PSVs have improved and enquiry levels for offshore construction vessels and AHTS vessels remain healthy. However, margins may be impacted by stiffer competition from Chinese shipyards which have seen a plunge in new bulk carrier and containership orders. Meanwhile, although the shorter term outlook for dredging and land reclamation is mixed, the group expects more dredging companies to upgrade their equipment in the future, benefiting the newly acquired VOSTA LMG division.
Healthy order books
The group’s shipbuilding net order book (comprising 32 vessels) stood at S$458m as at 31 Mar 2013 with progressive recognition up to 4QFY14, providing revenue visibility. ASL also has an outstanding order book of about S$78m with respect to long-term shipchartering contracts.
Ceasing coverage
The long-term future of ASL looks bright, but more time would likely be needed for significant earnings growth and a re-rating of the stock. In particular, the liquidity of the stock is relatively low, partly due to the free float of ~37.8%. We last rated ASL a Buy with a fair value estimate of S$0.86. Due to a re-allocation of internal resources, we are ceasing coverage on this counter.
Among the various offshore and marine stocks, ASL Marine (ASL) is one of the counters with a more diversified business model. Its shipbuilding operations accounted for 46% of gross profit in 9MFY13, ship-repair and conversion accounted for 22%, while ship-chartering contributed 32%. In Dec last year, it acquired VOSTA LMG for about 5m euros, and the group now has an “engineering” division, which brought in S$13.0m in revenue in 3QFY13.
Positive outlook, but competition stiffer
ASL Marine expects the outlook of the offshore and marine industry for this year to be “good”; utilization and charter rates for AHTS and PSVs have improved and enquiry levels for offshore construction vessels and AHTS vessels remain healthy. However, margins may be impacted by stiffer competition from Chinese shipyards which have seen a plunge in new bulk carrier and containership orders. Meanwhile, although the shorter term outlook for dredging and land reclamation is mixed, the group expects more dredging companies to upgrade their equipment in the future, benefiting the newly acquired VOSTA LMG division.
Healthy order books
The group’s shipbuilding net order book (comprising 32 vessels) stood at S$458m as at 31 Mar 2013 with progressive recognition up to 4QFY14, providing revenue visibility. ASL also has an outstanding order book of about S$78m with respect to long-term shipchartering contracts.
Ceasing coverage
The long-term future of ASL looks bright, but more time would likely be needed for significant earnings growth and a re-rating of the stock. In particular, the liquidity of the stock is relatively low, partly due to the free float of ~37.8%. We last rated ASL a Buy with a fair value estimate of S$0.86. Due to a re-allocation of internal resources, we are ceasing coverage on this counter.
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