STX OSV

Kim Eng on 5 June 2012

Background: STX OSV is a builder of offshore and specialised vessels used in the offshore oil and gas, as well as exploration and production industries. It focuses on AHTS, PSV, OSCV and other specialised vessels. The company has nine shipbuilding facilities worldwide, spread across Norway, Romania, Brazil and Vietnam. STX OSV was listed in November 2010 and is part of South Korea’s STX Corporation.

Recent developments: News of a possible sale of its parent’s 50.75% controlling stake in the company in January this year has propped up STX OSV’s share price. Industry sources suggest that a preferred bidder for the stake could soon emerge and could likely be Italian shipbuilder Fincantieri and PE firm Carlyle Group. A mandatory general offer could be triggered and market buzz has pointed to a price close to SGD1.60 per share.

Decent fundamentals. Putting aside the news on the stake sale, fundamentals for STX OSV are decent, with net cash of NOK437m and positive operating cash flows. Though 1Q12 performance was a tad lower on a YoY basis, it was largely due to timing of recognition. On a more positive note, EBITDA margin showed a slight improvement. Trading at consensus forward PER of 6.7x, the stock is hardly expensive.

Possible rebound in order activities. STX OSV anticipates a rebound in order activities for high-end offshore support vessels on the heels of increased activities in the subsea area. But if the markets remain jittery and oil prices continue to fall, a rebound may take longer than expected to occur.

Orderbook at healthy level. Notwithstanding the aforesaid, STX OSV’s orderbook is still at a healthy level with positive order win momentum in the first quarter of the year. Outstanding orderbook currently stands at NOK16.0b with NOK2.3b in new orders secured in 1Q12. These orders would likely keep its yards well utilised throughout 2012.