ASL Marine

ASL Marine: FY13 core profit was below consensus, due to the higher tax rate of 18%, otherwise on a normalized 10% tax rate, it would have met expectations. ASL declared dividend of 2¢. ASL’s yards are operating at close to full capacity, with order book at $370m, and $250m to be recognized in FY14. Enquiries for OSVs and hybrid terminal tugs (higher-value vessels) remain strong. In view of the bottomed out vessel prices in the AHTS market, ASL has entered the build-to-stock model to expand its shipbuilding margins. It will start with 4 generic AHTS vessels (6k bhp and 8k bhp) and one maintenance work vessel, costing $85m in total, and will be financed through ASL’s $170m bonds. Construction will begin in 1QCY14 and is expected to be completed by 1QCY15. AThis could be a game changer for its shipbuilding business as a successful sale of these vessels can fetch net margins of 30%. The stock trades at 0.7x P/B (1 s.d. below its 5 yr mean). CIMB maintains its Outperform rating and TP $0.86.