Friday, May 20, 2011

AmResearch has Sell on Tanjung Offshore, cuts fair value to RM1

KUALA LUMPUR: AmResearch reaffirms its Sell rating on Tanjung Offshore and cut its fair value to RM1 a share from RM1.33'' a share previously) ' pegging its FY11F earnings to a PE of 20 times ' following another set of weak numbers.

'We are cutting our estimates for FY11F-FY13F by 45%-54% to RM16mil-RM18mil following lower margin assumptions from 8%-9% to 7%-7.5% and cuts in revenue assumptions by 20%-30%,' it said on Friday, May 20.

AmResearch said Tanjung was in the red for the second consecutive quarter, with a larger magnitude of RM3mil for 1QFY11.

The losses are attributable to about RM3mil in losses from its UK-subsidiary Citech Ltd. Currently the unit has only about US$15mil in orderbook for the next 18 months and this is not sufficient to cover its sizeable operating costs.

Another factor is the weaker earnings from vessel chartering division. Three vessels were lying idle during 1QFY11, translating into a utilisation rate of about 80%. Nonetheless, it has since been operating at full capacity although six of the vessels are currently under spot contracts.

AmResearch said the losses for the quarter was also contributed by a net loss of RM4.7mil incurred from the disposal of its stake in Hercules Tanjung Asia s/b, a rigs provider.

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