As expected, Alam was awarded an umbrella contract for the provision of spot charter for marine vessels by Petronas Carigali Sdn Bhd (PCSB) for its operations in Malaysia.
"However, our earnings are unchanged for now as the contract value is not fixed and will depend on the actual number of days the vessels are on hire. The umbrella contract is for a two-year period starting from January 2015, with an option for a one-year extension," it said.
Alam was awarded seven of the eight packages which allow the company to provide marine vessels.
"Going forward, we have assumed a marginally higher OSV utilisation rate of 73% in FY15 vs 71% in FY14, as a lower number of vessels (5-7 vessels) will be dry-docked compared with 10 vessels in FY14.
"We understand that 70% of its fleet are currently contracted while the rest are dry-docked.
"However, we see weaker charter rates ahead given that Petronas has begun negotiating for lower charter rates amid its focus on optimising cost structure which includes cutting capex by 10%-15% in the next two years and reducing opex by 30%," it said.
AmResearch expects a pick-up in earnings momentum in the OIC division in 2HFY15, upon the execution of the RM248mil transport and installation contract secured with MMHE and Technip.
Alam intends to pursue smaller contracts with higher success rates.
To-date, the group had secured an RM30mil contract, where the margin was more than 50% due to early completion. The group’s order book stands at circa RM1.1bil (excluding the umbrella contract), of which 50% are from OSVs, while its tender book stands at RM2bil.
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