ASL Marine

OCBC on 10 May 2012

ASL Marine (ASL) reported a 32.3% increase in revenue to S$113.8m and a 1.0% drop in net profit to S$8.0m in 3QFY12 such that results were slightly better than expected. This was partly due to stronger margins in the shipbuilding segment. ASL has been securing sizeable orders recently, bringing its outstanding shipbuilding order book to S$642m, the highest level since 3QFY09. Meanwhile ASL is still seeing a healthy enquiry level for newbuilds. The stock has performed well since we upgraded it to BUY on 13 Feb, rising by about 14% vs the STI’s 2% fall over the same period. We increase our gross margin assumption from 13.5% to 14.0% and roll forward our valuations to 12x FY13F core earnings such that our fair value estimate rises from S$0.68 to S$0.75. Maintain BUY.

3QFY12 results better than expected
ASL Marine (ASL) reported a 32.3% increase in revenue to S$113.8m and a 1.0% drop in net profit to S$8.0m in 3QFY12 such that 9MFY12 revenue and net profit accounted for about 78% and 80% of our full year estimates, respectively. Results were slightly better than expected, and this was partly due to stronger margins in the shipbuilding segment.

Gross margins remain mostly healthy
Gross profit margins in the three divisions remained mostly healthy - shipbuilding recorded a gross margin of 11.9% vs 7.6% in 3QFY11, whereas chartering registered a gross margin of 24.9%, which was lower vs 25.3% in 3QFY11. However, gross margin for repair fell from 15.4% in 3QFY11 to 11.9% in the last quarter, and this was due to unbooked additional costs for some repair jobs that were undertaken in 2QFY12. Excluding these costs, the margin would have been 16.3%.

Outstanding order book highest since 3QFY09
After securing S$426m worth of new contracts in 2HCY11 (vs. S$93.5m in CY2010), ASL has continued to win new shipbuilding orders worth about S$186m YTD. This brings its outstanding shipbuilding order book (from external customers) to S$642m (40 vessels) with deliveries till 2Q14, and this is the highest level that the group has seen since 3QFY09.

Stock has performed well but still a BUY
ASL is seeing a healthy enquiry level for newbuilds especially those relating to offshore support vessels, and we expect more new orders for the group in the coming quarters. The substantial order book also provides enhanced earnings visibility. The stock has performed well since we upgraded it to BUY on 13 Feb, rising by about 14% vs the STI’s 2% fall over the same period. We increase our gross margin assumption from 13.5% to 14.0% and roll forward our valuations to 12x FY13F core earnings such that our fair value estimate rises from S$0.68 to S$0.75. Maintain BUY.