STX OSV reported a fairly muted set of 3Q12 results that were below ours and the street’s expectations. 3Q revenue and net profit to shareholders declined by 27% and 39% YoY to NOK 2.5b and NOK 228m respectively. On a sequential basis, revenue and net profit fell by 26% and 18% respectively. The weaker performance in 3Q12 was mainly due to slower pace of revenue recognition during the tail end of shipbuilding. Its yards reported generally stable operations, but the slow order intake (only NOK 900m in 3Q) may lead to under-utilization in its Norwegian yards in 2013. In view of this and the weaker-than-expected 3Q results, we reduce our fair value estimate to S$1.69 (previously S$2.00), Maintain BUY.
3Q results below
STX OSV reported a fairly muted set of 3Q12 results that were below ours and the street’s expectations. 3Q revenue and net profit to shareholders declined by 27% and 39% YoY to NOK 2.5b and NOK 228m respectively. On a sequential basis, revenue and net profit fell by 26% and 18% respectively. The weaker performance in 3Q12 was mainly due to slower pace of revenue recognition during the tail end of shipbuilding. STX OSV had delivered eight vessels in 3Q12 – about a third of the total vessels delivered in 2011.
Orderbook development
Order intake has also slowed down noticeably with only two new vessel contracts (1 PSV and 1 CLV) worth a total of NOK 900m secured during 3Q12. Two additional contracts (2 OSCVs; estimated NOK 1.3b) have been secured after end of 3Q12. However, the amount is still insufficient to replenish its order-book which depletes at about NOK12b per year (or NOK 3b per quarter). The operating environment remains challenging, with low order activity in the AHTS and PSV markets. For the OSCV market, shipowners are constrained by the availability and cost of financing.
Operations review
The group reported generally stable operations, but the slow-down in new orders would likely lead to under-utilization in the Norwegian yards in 2013. In Brazil, the Niteroi yard delivered two vessels in 3Q, but continues to suffer from an overload situation. For the new Promar yard, construction is 60% completed and within budget. Recruitment is ongoing and management is hopeful that it can begin shipbuilding in 2H13F.
BUY with a lower S$1.69 FV
In view of the weaker-than-expected 3Q results and slower order intake, we lower our FY12-13F estimates by about 10-15%. We also roll forward our valuation to 9x FY13F EPS. Accordingly, our fair value estimate eases to S$1.69 (previously S$2.00). Maintain BUY.
Orderbook development
Order intake has also slowed down noticeably with only two new vessel contracts (1 PSV and 1 CLV) worth a total of NOK 900m secured during 3Q12. Two additional contracts (2 OSCVs; estimated NOK 1.3b) have been secured after end of 3Q12. However, the amount is still insufficient to replenish its order-book which depletes at about NOK12b per year (or NOK 3b per quarter). The operating environment remains challenging, with low order activity in the AHTS and PSV markets. For the OSCV market, shipowners are constrained by the availability and cost of financing.
Operations review
The group reported generally stable operations, but the slow-down in new orders would likely lead to under-utilization in the Norwegian yards in 2013. In Brazil, the Niteroi yard delivered two vessels in 3Q, but continues to suffer from an overload situation. For the new Promar yard, construction is 60% completed and within budget. Recruitment is ongoing and management is hopeful that it can begin shipbuilding in 2H13F.
BUY with a lower S$1.69 FV
In view of the weaker-than-expected 3Q results and slower order intake, we lower our FY12-13F estimates by about 10-15%. We also roll forward our valuation to 9x FY13F EPS. Accordingly, our fair value estimate eases to S$1.69 (previously S$2.00). Maintain BUY.
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