STX OSV

OCBC on 15 Aug 2012

STX OSV reported a 21.6% YoY increase in revenue to NOK3.3b and a 2.6% YoY increase in net profit to NOK279m, such that 1H net profit represented 44% and 49% of ours and the street’s FY12F estimates. EBITDA margin decreased to 13.8% in 2Q12, compared to the exceptionally high 16.4% in the year-ago period. The group suffered some delays in its Brazilian yard due to general yard overload, temporary supplier constraints and bottlenecks in subcontracting capacity. Management has already taken measures to address these issues, and added that the financial impact has been largely absorbed in previous quarters. Meanwhile, the group also announced a 13 S cts special interim dividend (1H11: 5 S cts interim dividend). We continue to like STX OSV for its strong order pipeline and niche market position. Maintain BUY with unchanged S$2.00 fair value estimate.

2Q12 results in line
STX OSV reported a 21.6% YoY increase in revenue to NOK3.3b and a 2.6% YoY increase in net profit to NOK279m, such that 1H net profit represented 44% and 49% of ours and the street’s FY12F estimates. EBITDA margin decreased to 13.8% in 2Q12, compared to the exceptionally high 16.4% in the year-ago period (primarily due to a high level of operation stability in 2011). The group also announced a 13 S cts special interim dividend (1H11: 5 S cts).

2Q order intake of NOK5.0b
During the quarter, the group took in 8 orders (1 AHTS, 3 OSCVs and 4 PSVs) worth a total of NOK5.0b. Total order-book was NOK18.3b as of quarter-end and comprised 55 vessels, of which 31 are of its own design. Management continued to see healthy demand in the subsea support and construction segment, driven by increased offshore installation activity. In contrast, the lower-than-anticipated charter rates for AHTS and PSVs have somewhat dampened demand for the respective vessel types.

Delays in Brazil operations
STX OSV suffered some delays in its Brazil operations and several of its vessels were behind schedule. This was largely due to general yard overload, temporary supplier constraints and bottlenecks in subcontracting capacity. To alleviate capacity constraints, it reached an agreement with Rio Nave shipyard for the sub-delivery of steel hulls. In terms of financial impact, management added that it takes in costs on an ongoing basis, meaning that a substantial portion of the cost over-run has already been absorbed in previous quarters.

Maintain BUY with unchanged FV.
We continue to like STX OSV for its strong order pipeline and niche market position. The bumper 13 Scts special interim dividend makes its share price even more attractive. We updated our model slightly for the 2Q results, but prefer to keep our fair value estimate of S$2.00 unchanged. Maintain BUY.