- 2Q11 above on strong margins which should be sustainable in 2H.
- Order wins to feature strongly in 2H; potential re-rating drivers.
- FY11F raised by 17% on positive forward guidance.
- Maintain BUY, S$1.90 TP.
2Q11 above.
STX OSV posted 2Q11 recurring PATMI of NOK284m (+100% y-o-y), above our and consensus expectations. This was due to improvement measures initiated and good execution, resulting in sharp EBIT margin expansion to 15.3% (+9.4ppt y-o-y). A special interim DPS of 5Scts was declared, equivalent to a 46% payout ratio on 1H11 earnings.
Expect order wins to feature strongly in 2H.
The group notes a sustained improvement in the market over 1H11, and expects it to persist through the rest of 2011. In line with this, order wins have rebounded off the lows in 1Q, with 2Q posting an intake of NOK3.1bn. Excluding the Transpetro and Island Offshore orders, we expect STX OSV to secure another NOK5.6bn worth of orders in 2H11. The group is in a sweet spot to benefit from a recovery in the newbuild cycle, given its market positioning and track record.
Robust FY11F earnings guidance; raise FY11F by 17%.
As management has positively guided that 2H11 EBITDA margin will at least maintain at 1H’s level, we raise our FY11F by 17% to NOK1.1bn. Our FY12/13F numbers are maintained as pricing for new orders are expected to be more competitive at the start of the newbuilding cycle, and operations at its second yard in Brazil are gradually ramped up.
Recent sell-down offers good entry point; maintain BUY.
Our TP is raised to S$1.90 (from S$1.86) as we roll forward to 11x FY12 PE (previously blended FY11/12). The stock trades at an undemanding 6.5x/7.2x FY11/12 PE, following the recent market sell-off. We continue to like the stock for its market dominance in large AHTS and PSVs, and strong track record. We expect term catalysts in the form of order wins. Maintain BUY.
Sorry, the comment form is closed at this time.