RHB Indonesia Morning Cuppa - 06 March 2018 (Wintermar Offshore Marine, Today's News)

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Wintermar Offshore Marine

We visited Wintermar Offshore Marine (WINS IJ) to get the latest update regarding 2018 strategy. Here are the key takeaways:

Until 9M17 fleet utilization was at 62% (total fleet was 69 vessels) and this year management expects utilization to improve to around 70%. This is helped by the recent rise in oil price along with the increasing number of Indonesian rigs from 3 in January 2017 to 6 rigs in November 2017, and Government’s plan to spend USD17bn (+82% YoY) for upstream downstream oil & gas investment that restores investors confidence. Contracts on hand as per Dec 17 was USD100m, of which USD40m will be realized in FY18 and the remaining will last until FY21.

Although utilization is expected to improve management does not expect a hike in freight rate as the OSV market is still in oversupply condition.

Management also continues to divest its low-tier vessels from 40 in 2010 to 17 vessels by 2018 while mid- and high-tier vessels were increased to current standing of 39 and 12 vessels respectively. These mid and high tier vessels are the beneficiaries of Indonesia’s cabotage law for future exploration projects.

As of 9M17 the company was still able to book positive gross margin due to various cost control measures such as: ‘cold & warm stacking of vessels’, reduction of crew expenses, and hiring freeze. In addition, the company also venturea to new markets such as PNG, Micronesia, and Middle East.

However, management expects 4Q17 margins to remain compressed because of docking costs being brought forward due to idle vessels and more spare parts purchases to accomodate longer contracts (2 years vs 5 months previously). In addition, management will book another aset impairment for its high-tier vessels in FY17 (around USD20m). Thus, management expects margins to start improving in 2Q18.

Management also continues to deleverage and managed to reduce installments by 30% while principal payments are delayed until FY19.

Based on consensus, WINS is currently trading at 0.61x FY18F PBV.

We have no rating on the counter.

Analyst: Yualdo Tirtakencana Yudoprawiro (6221) 2970 7062

Morning Cuppa Full Report: Indonesia Morning Cuppa 060318

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