ASL Marine Holdings - More signs of orderbook recovery? (DBSVickers)

HOLD S$0.51

At a Glance

• ASL’s FY11 in line; final DPS of 1.5 Scts or 2.9% yield

• Recent order wins of S$28m builds on order momentum; S$310m orderbook translates to healthy 1.7x book-to-bill

• Maintain HOLD; TP adjusted to S$0.59

Comment on Results

FY11 in line. FY11 recurring net profit of S$31.9m (-14% y-o-y) was within expectations. Revenue declined 22% to S$363.2m due to 1) lower shipbuilding orderbook; 2) fewer large conversion jobs; and 3) weaker demand for towing jobs. Gross margin was relatively stable at 13.7% (+0.7ppt). Net gearing inched up to 0.61x vs. 0.37x a year ago and may edge higher towards 0.68x by end FY12 as 20/80 payment terms to customers become increasingly common. A final DPS of 1.5Scts was declared, translating into a full year payout ratio of 20% or a yield of 2.9%.

Recommendation

Snapping the declining orderbook trend. ASL booked S$193m of new shipbuilding orders in FY11 (vs. FY10’s estimated S$110m), and recently added orders for 2 vessels worth S$28m, bringing its current orderbook to S$310m (for delivery into 2013). With c. 58% to be booked in FY12, this translates into a relatively healthy bookto-bill of 1.7x. While we are encouraged by the reversal of the declining orderbook trend, we are not overly excited as these orders were likely to have been priced at relatively low margins, given the intense competition in the market. Our FY12/13F order wins assumption remains at S$150m/S$200m.

Maintain HOLD; S$0.59 TP. We trim our FY12/13F earnings by around 5% each as we adjust the recognition schedule for ASL’s shipbuilding orderbook. In line with this, our TP is lowered to S$0.59 (from S$0.63), still pegged to 8.2x FY12 PE. While valuation is undemanding, we look forward to stronger order flows and sustained margin recovery before turning more positive on the counter. Maintain HOLD.