STX OSV

OCBC on 20 June 2012

Following our report “Market Rumours – Caveat Lector” issued last week, in which we argued that the market has overreacted to market rumours involving a supposed Fincantieri/Carlyle deal, STX OSV has announced three contracts worth an estimated NOK2.5b. This underscores the buoyancy of the offshore market and validates our investment thesis that investors should take the opportunity to gain exposure into the premium offshore builder at a reasonable valuation. Year-to-date, we estimate STX OSV has secured about NOK6.7b of contracts. This forms about 60% of our FY12F estimate (NOK11b). As such, we are keeping our forward estimates unchanged. Maintain BUY with S$2.00 fair value estimate.

Three contract wins within six days
Following our report “Market Rumours – Caveat Lector” issued on 13 June 12, in which we argued that the market has overreacted to market rumours involving a supposed Fincantieri/Carlyle deal, STX OSV has announced three contracts worth an estimated NOK2.5b (USD400m). This underscores the buoyancy of the offshore market and validates our investment thesis that investors should take the opportunity to gain exposure into the premium offshore builder at a reasonable valuation.

One OSCV and three PSVs
On 14 Jun 2012, STX OSV announced it has signed (i) a contract for a large, advanced Offshore Subsea Construction Vessel (OSCV) and (ii) a LOI for a Platform Supply Vessel (PSV). The first contract - worth about NOK1.4b - is with Ocean Installer and Solstad Offshore. It is subject to board approval from Norwegian Guarantee Institute for Export Credit (GEIK), expected to be received around 20 Jun 2012. The second order was awarded by Troms Offshore for an undisclosed amount. Based on its specifications (94.5m by 21m, and deadweight of 5,700 tonnes), we estimate the contract size to be around NOK350m. The contract is expected to be entered into by end Jun 2012. The third contract, announced last evening, was with Farstad Shipping for two PSVs worth a total NOK700m. The vessels will be scheduled for delivery in 2Q-3Q14 from Langsten (Norway) and Vung Tau (Vietnam) yards.

Maintain BUY with S$2.00 fair value estimate
Year-to-date, we estimate STX OSV has secured about NOK6.7b of contracts. This forms about 60% of our FY12F estimate (NOK11b). As such, we are keeping our forward estimates unchanged. Maintain BUY with unchanged S$2.00 fair value estimate.