Report from DMG.

ASL Marine announced last week that it has entered into a conditional agreement with its JV partner, Manhattan Resources to dispose its entire 50% interest in ASL Energy to this partner. ASL Energy is a jointly owned entity between ASL and MRL. It is primarily involved in the marine transportation of coal in Indonesia. ASLE owns 64 tugs and barges as well as a floating coal terminal.

ASLE reported a net loss of $0.3m for 9M08 mainly due to higher foreign exchange loss, and absence of profits from Tabang coal concession (which completed its disposal earlier this year). Hence, we believe the divestment of this entity would enable ASL to streamline and focus on its core businesses.

ASL is in the process of adding two new graving drydocks for repair, with completion expected in 2009. Coupled with its fleet expansion plans, we estimate ASL requires a CAPEX of $100m and $50m for FY08F and FY09F respectively. Despite this high CAPEX going forward, we estimate ASL’s net gearing to reduce from 0.56x in FY08F to 0.18x in FY09F due to strong operating cashflow.

While there is no change to our FY08 estimates, ASL will record a net gain of $9.6m in FY09F, conditional upon the terms of this disposal. Hence, our FY09F net profit is raised from $70.1m to $78.1m. However, we maintain our TP of $1.83 based on 8.5x FY08F/09F blended recurring EPS. Maintain BUY.