• Eksportfinans loan exposure to a single customer to be cut by 80%,
    limited impact to STX’s existing order book
  • But potentially negative for new order intake, as the move comes
    into effect from 2013.
  • Separately, STX OSV in the running for Petrobras-bound pipelay
    vessel, estimated at US$200-400m
  • Maintained BUY, TP unchanged at S$1.54

Eksportfinans to reduce single client loan exposure.
With the expiry of exemption to the European Union’s Capital Requirement Directive by end 2012, Norwegian export credit institution Eksportfinans’ maximum allowable exposure to a single client will be scaled down by 80% to c. NOK1.4bn, from the current NOK7.1bn. While half of STX OSV’s current projects are from customers backed by Eksportfinans, these projects were secured before the proposed implementation date (2013) and hence, limits the impact on its existing order book.

But potentially negative on new order intake for STX OSV
Nonetheless, we believe this presents additional uncertainty on the funding outlook which could affect new order intake for STX OSV. We had previously reduced our FY11-13 order wins assumption to NOK10.5bn / NOK10.0bn / NOK12.5bn, given possible order deferments amid ongoing economic uncertainty, and tightening credit market.

STX OSV could benefit from recent Petrobras pipelay orders. Separately, STX OSV is amongst the bidders for a newbuild pipelay vessel, to be built in Brazil. Depending on the vessel’s technical specifications, we estimate the value of this potential shipbuilding contract to range between US$200-400m, which will serve as a boost to STX OSV’s orderbooks if won. Maintain BUY, TP S$1.54. TP of S$1.54 is maintained, based on 9x FY12 PE.

Current valuations at 5.6x/7.0x FY11/12 PE are undemanding, supported by strong quarterly results over the near term and sustained solid project execution. Maintain BUY on STX OSV for its market dominance in complex and highly customized OSVs, solid execution and track record.

The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel

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November 3, 2011

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