Less costly assets, less impact. Activity will be greatly affected in a downturn when the cost or working capital needed is high. Oil companies have doused their enthusiasm about going into deepwater drilling due to the significant funds and costs involved. Tugs and barges are relatively less costly than most other offshore support vessels, and being a specialist in this area may serve ASL Marine well in this downturn.
Ship repair activities holding up. We were updated by management that ship repair activities are still holding up for now, though we note that ship owners may attempt to defer maintenance works that are not mandatory. As mentioned in our earlier report, this business segment is likely to be affected during this downturn and experience pricing pressures. However, the medium to long-term prospects of this business is bright considering the significant increase in the global fleet in the past few years.
Maintain BUY. The current economic downturn and the uncertainty in oil prices make it hard for companies to negotiate for new contracts unless they have deep pockets backed by earnings visibility. ASL's relatively low gearing (net debt-to-equity: 0.17x), strong order book (S$582m extends to FY11) and diversified income streams will aid it to emerge as a stronger player in the longer haul. The stock is currently trading around 3.5x FY09F PER, lower than the average 9x of its comparable peers. We maintain fair value estimate of S$1.03 for ASL Marine and our BUY rating remains.
Click here for more Offshore Marine Stocks Technical Analysis
Sponsored Links
Comments
No response to “ASL Marine: Character to tide through tough times”
Post Comments (Atom)
Post a Comment |
Post a Comment