Alam Maritim’s weak cash flow seen to sustain

TheEdge Thu, Jul 27, 2017 11:07am - 6 years View Original


Alam Maritim Resources Bhd
(July 26, 12.5 sen)
Maintain underperform with a lower target price (TP) of eight sen:
Alam Maritim Resources Bhd earlier this week announced that Bank Negara Malaysia’s Corporate Debt Restructuring Committee (CDRC) had granted an extension of time until Aug 11 to the company to submit a proposed restructuring scheme. Recall that on May 25, Alam Maritim received a letter of approval from the CDRC, which required it to submit a restructuring scheme within 60 days. The 60-day deadline was due on Monday. With the successful extension of another 18 days, Alam Maritim will continue to remain under the informal standstill arrangement with the respective financiers/sukuk holders. Should Alam Maritim fail to submit what is required by the CDRC, we do not discount the possibility of the company following the footsteps of Perisai Petroleum Teknologi Bhd and Swiber Holdings Ltd, whereby a wind-up petition may be filed by sukuk holders/financiers.

Alam Maritim had missed the sukuk principal payment of RM30 million due on July 6. Note that Malaysian Rating Corp (MARC) has placed the RM500 million sukuk ijarah on MARCWatch Negative following the application to CDRC in May this year. Following the missed payment, MARC has further downgraded Alam Maritim’s sukuk rating to “D” from “BB+”.

Alam Maritim has another sukuk principal repayment of RM45 million due in January 2018. As of the first quarter ended March 31, 2017 (1QFY17), Alam Maritim had cash and bank balances of RM37.5 million and the sinking fund set aside was reduced to RM11.7 million from RM28.4 million as of 4QFY16. Going forward, we expect weak cash flow from operations to sustain given that Alam Maritim is aiming to register a revenue of between RM200 million and RM300 million backed by an order book of RM390 million.

With no reprieve in the near-term outlook, we expect further selling pressure on the stock. Thus, we maintain our “underperform” call with a lower TP of eight sen from 15 sen previously, pegged at a lower valuation of 0.1 times financial year 2018 price-to-book value (from 0.2 times), which is still below the sector’s average and in line with Perisai’s valuation. — Kenanga Research, July 26
 

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