Batam yard keeping ASL Marine afloat

The Indonesia-based shipyard is receiving robust shipbuilding and ship-repair orders while posting lower costs.

As a result, an earnings rebound is in the cards by FY13, according to DBS Vickers, with the Batam Yard leading the charge in improving orderbook revenues and stabilizing operating margins.

Here's more from DBS Vickers:

Batam yard key pillar for ASL Marine. We recently visited ASL Marine’s shipyard in Batam, Indonesia and discussions with management confirmed a robust operating outlook, in line with our expectations. The cheaper yard operations in Batam, as compared to Singapore, and associated synergies between the two yards enable the group to bid competitively for contracts, while still reaping decent margins. The shipbuilding division has seen impressive order inflows in recent months, driving orderbook close to pre-crisis highs and ensuring healthy yard utilisation till end-2013. While the group can still take in more orders, estimated earliest delivery dates could be end-2013/ early-2014.

Shipbuilding margins well protected; ship-repair margins could pick up with higher activity levels. Steel accounts for only about 10% of shipbuilding costs for the type of vessels being built by ASL and steel prices are locked in on a project-by-project basis, ensuring steady shipbuilding margins. On the ship-repair side, management indicated that current inquiry levels are better than expected, and that most ship-repair slots are fully utilised at the moment, with forward bookings stretching up to three to four months. This indicates a strong pick-up in demand for ship-repair activities, especially from the buoyant offshore market, which could potentially boost ship-repair margins.