Orderbook provides earnings visibility till FY11. As at 31 Mar 09, ASL has an outstanding orderbook of S$582m (from S$663m as at 31 Dec 08) for deliveries of 35 vessels to external customers. Separately, ASL also secured S$22m worth of orders for shiprepair and ship conversion projects including fabrication and outfitting works to a Heavy Transport Vessel and conversion of tanker into a FSO unit.
Settlement on rescission of shipbuilding contract and thus, oil tanker to add to ASL’s fleet. In late Apr, ASL announced that it had reached a settlement with a customer on the rescission of a contract to build an oil tanker. According to the management, under the terms of the contract, the customer was required to accept delivery of the vessel upon completion. However, the customer was unwilling to do so until all the outstanding items were settled. As this matter could potentially lead to a protracted, costly arbitration, the management then decided to cancel the contract, refund the customer US$18.8m (equivalent to the total payment by the customer to-date) and take ownership of this oil tanker. The management disclosed that they are currently in the process to charter this vessel.
TP raised to S$1.07, maintain BUY. Our core FY09 operating profit remains unchanged but the net profit is raised owing to increased gain on disposal of PPE as part of ASL’s fleet renewal programme. We have also reduced our FY10 margins in view of higher operating cost incurred. Given the recent sector re-rating, we ascribe a valuation metric of 6x (in-line with ASL’s peers) FY10 to recurring EPS. As such, our target price is now S$1.07 (from S$0.55 previously). Maintain BUY.
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