ASL Marine must brace for stiffer competition against Chinese yards

Significant earnings growth likely to be delayed.

According to OCBC Investment Research, ASL Marine expects the outlook of the offshore and marine industry for this year to be “good”; utilization and charter rates for AHTS and PSVs have improved and enquiry levels for offshore construction vessels and AHTS vessels remain healthy.

However, margins may be impacted by stiffer competition from Chinese shipyards which have seen a plunge in new bulk carrier and containership orders. 

Here's more:

Meanwhile, although the shorter term outlook for dredging and land reclamation is mixed, the group expects more dredging companies to upgrade their equipment in the future, benefiting the newly acquired VOSTA LMG division.

The group’s shipbuilding net order book (comprising 32 vessels) stood at S$458m as at 31 Mar 2013 with progressive recognition up to 4QFY14, providing revenue visibility. ASL also has an outstanding order book of about S$78m with respect to long-term shipchartering contracts.

The long-term future of ASL looks bright, but more time would likely be needed for significant earnings growth and a re-rating of the stock. In particular, the liquidity of the stock is relatively low, partly due to the free float of ~37.8%.