Good morning,
Wintermar Offshore Marine: Soldiering On During The Downcycle
We
visited Wintermar for updates on its business as well as the potential
jobs flow from the commencement of Tangguh's third LNG train, a massive
project that carries an investment value of USD8bn until 2020. We
believe its fleet utilisation rate should improve by 2H17,but expect
freight rates to remain depressed due to the insufficient jobs for the
OSV market. The company is in the midst of debt restructuring.
We stay NEUTRAL, until more details on the restructuring are made known.
¨ Still
in survival mode. In our view,
Wintermar Offshore Marine (Wintermar) is still in survival mode.
Management carried out USD2.5m worth of vessel impairments in 4Q15 and
said its freight rate per horse power – a common benchmark
to gauge the profitability of OSVs – has fallen to less than
USD0.80/brake horsepower (bhp). This was from levels as high as
USD2/bhp. Meanwhile, Wintermar’s overall fleet utilisation is below 50%.
This was as most of the jobs flow related to deepwater oil
& gas fields were halted after crude oil prices tumbled.
¨ In
the midst of debt restructuring. Wintermar
is currently negotiating with its bankers to postpone the principal
debt repayment of loans related to its vessels. It has restructured
about one-third of the debt with its principal
banker and is looking to do the same with its remaining debt. As the
process is still ongoing, management could not give us too much
information at this juncture.
¨ Tangguh
Train 3 contributions from 2H17.BP
approved the final investment decision (FID) of Tangguh's third LNG
train in mid-2016. The project is now in the engineering, procurement
and construction phase. Drilling on 11 wells
is expected to commence in Jun 2017, which would drive demand for
high-tier OSVs by then. Our industry source from Singapore said that
this project requires the services of >100 OSVs throughout its
lifespan.
¨ Expect
more jobs to gradually come in. We
discovered from several OSV players we visited in the region that he
jobs flow from Tangguh is not sufficient to drive OSVs’ freight rate
recovery. Although the outlook is still challenging,
now that crude oil price has stabilised above USD50/bbl, oil majors are
looking to restart deepwater projects and lock in the currently low
project costs. Having said that, the pace of jobs returning may be slow
due to the time lag between the FID and well
developments.
¨
NEUTRAL, pending further details of the debt restructuring exercise.
While we are optimistic
on Wintermar’s potential turnaround in FY17-18 and its depressed
valuation of 0.33x FY17F P/BV, we still have concerns on its freight
rates downtrend and weak cash flow-generation abilities. This is in
regards to its impending USD34m principal debt repayment
in the coming year (should the restructuring initiative be
unsuccessful). We remain NEUTRAL and roll over our valuation to FY17.
Our new IDR220 TP (from IDR195) is pegged to 0.3x FY17F P/BV. Key
downside risks are solvency and business risks. (Norman
Choong CFA)
|
|
|
Corporate News Flash:
|
|
Indofood Sukses’s minority shareholders approval on Minzhong divestment
Last Friday, Indofood Sukses’ (Indofood) minority shareholders has approved
Minzhong divestment.
We see this divestment as unlocking value for Indofood,
driven by:
1) A healthier balance sheet since the proceeds will pay Indofood’s debts;
2) A lower currency risk after a reduction of foreign currencies debts.
Marvellous
Glory Holdings (Marvellous) is offering to buy 82.9% of Minzhong that
is owned by Indofood at price of SGD1.20/share. Indofood will receive
SGD652m in proceeds via: i) SGD416m cash payment for a 52.9% stake in
Minzhong;
ii) SGD236m in exchangeable bonds for a 30% shareholding.
According
to Indofood management, the company likely to convert the exchangeable
bonds into shares. Hence, after the divestment, Indofood likely to still
own 30% stakes in Minzhong. In our calculation, Indofood likely to book
around SGD40m gain (around 10% of Indofood FY16F earning) from this
transaction since the company bought Minzhong at average price of
SGD1.08/share .
Minzhong
divestment likely creating positive sentiment on Indofood’s share
price. Maintain BUY with SOP based TP of IDR10,300 (19.4% upside),
implying
19x/16x FY17F-18F P/Es respectively. We assumed a 15% holding company
discount in deriving our TP. (Andrey
Wijaya)
|
|
Media Highlights:
|
|
Economics
Indonesia customs recorded IDR108.2trn revenue as of Oct 23
Corporates
Bank Mandiri raises provisions to IDR18-20trn
Bank
Mandiri (BMRI IJ, NEUTRAL, TP: IDR11,600) will raise its provisions to
IDR18-20trn for FY16 or an 63-82% YoY increase from IDR11trn on the back
of
increasing bad loans beyond the commodities sector. Moreover, the bank
expects its provisions to dip to IDR14-16trn next year as it continues
to restructure loans that are at the risk of defaulting. On the other
hand, the bank is planning to invest at least
MYR300m to open 10-12 branches in Malaysia over the next 3 years. (Jakarta Globe)
Comment: Such projected FY16's provision is already
inline with our number as we expect that pressure in asset quality would linger up until 1Q17 at the soonest (Bank
Mandiri : Is The Worst Already Over?).(Eka
Savitri)
Indonesia average mortgage rate recorded at 10.99% in August 16
Indonesia
Financial Services Authority (OJK) recorded the average mortgage rate
to be at 10.99% in August or only 34bps lower YoY despite the 125bps
benchmark
rate cut this year. OJK indicates that the total bad mortgages from 118
lenders that are unpaid by more than 90 days had risen to IDR9.9trn in
August (+11.2% YoY) or 2.82% from the country’s total mortgage. On other
note, OJK expects the lending to grow by
6-8% this year, lower than previous estimate at 10-12%. (Jakarta Globe)
Comment:
We anticipate the pickup in mortgage would
be more substantial in next year particularly with recent BI's
relaxation on loan-to-value policy. Yet, we project subsidised mortgage
would continue to post decent growth figure on the back of government's
support to reduce housing backlog of c.13mn units.
Bank Tabungan Negara (BBTN IJ, Buy, TP: IDR2,420) is the main
beneficiary for subsidised mortgage given its long-standing experience
handling the middle low income mortgage segment.(Eka Savitri)
Ciputra Surya pursues IDR1trn additional marketing sales until the end of 2016
Trans Java toll projects target financial closing in November
Unilever realized IDR1.25trn capex as of 9M16
Wijaya Karya targets to sign the construction contract of high speed train project in November
Kawasan Industri Jababeka to issue additional USD3.15m bonds to USD189.15m
Tiphone Mobile Indonesia eyes IDR30trn top line in 2017, up 15% YoY.
Vale Indonesia is optimistic to meet the FY16's production target
|
|
Our Recent Publication:
|
|
Economic HIghlights: BI Unexpectedly Cuts The Key Rate to 4.75%
Link to report: BI
Unexpectedly Cuts The Key Rate to 4.75%
|
|
Company Update: Bank Rakyat Indonesia: Reaching a New Balance
Link to report: BRI:
Reaching a New Balance
|
|
Sector update: Building Materials: Sales To Pick Up Despite Intensified Competition
Link to report: Sales
To Pick Up Despite Intensified Competition
|
|
Company Results: Arwana Citra Mulia : Strong Earnings Recovery To Sustain
Link to report: Arwana
Citra Mulia : Strong Earnings Recovery To Sustain
|
|
Economic Highlight: Exports Continues to Recover while Imports Fall Deeper in September
|
|
Not Rated Note: Wismilak Inti Makmur : Only Listed Company To Enjoy New Excise Tax Threshold
|
|
Sector update: Regional Oil & Gas: Glimmer of Hope
Link to report: Glimmer
Of Hope
|
|
Company Update: Hexindo Adiperkasa: Refurbishment Cycle To Boost Spare Parts Revenue
|
|
Corporate news flash: Semen Indonesia: Working To Sort Out Rembang Plant Quagmire
Link to report: Semen
Indonesia : Working To Sort Out Rembang Plant Quagmire
|
|
Sector news flash: Property: Revision To Foreign Property Ownership Regulation
Link to report: Revision
To Foreign Property Ownership Regulation
|
Best regards,
Helmy Kristanto
Director
Head of Indonesia Research
PT. RHB Securities Indonesia
