Towards Financial Freedom
STX OSV - Below Expectations; Downside Supported by GO
4QFY12 net profit of NOK124m (-81% y-o-y) was below ours and street expectations due to lower revenue (-19% y-o-y), lower EBITDA margin of 11.4% (4Q11: 28.2%) and NOK47m impairment. Balance sheet remains healthy with net cash (excluding construction loan) of SGD0.342/share but no final dividend was declared. We cut FY13-14 EPS by 7-10% on lower EBITDA margin assumptions and lower our TP to SGD1.82 based on 12x FY13F P/E. Stock downside is supported by the cash general offer at SGD1.22/share and we remain positive on the stock given its market leadership in the high-end vessel market and attractive valuation at 8.6x FY13F P/E.
Lower yard utilisation lead to weaker margins. 4QFY12 net profit of NOK124m (-81% y-o-y) boosted full-year net profit to NOK902m(-43% y-o-y), 10% below ours and consensusestimates. 4QFY12 revenue (-10% y-o-y) missed on lower order book recognition while EBITDA margin of 11.4% in the current quarter was below our estimate of 13.3%.
NOK15.1bn order book as of end-FY12. STX OSV ended 4QFY12 with an order book of NOK15.1bn for 48 vessels. The company wonanother three new orders YTD 2013 valued at ~NOK2.4bn. Order win of NOK9.5bn for 16 vessels in 2012 was disappointing, but we have revised our estimates from the disappointment in our report on 15 Feb 2013.
Strong cash balance but no final dividend declared. Excluding the construction loan to fund on-going projects, STX OSV's net cash of NOK1.86bn (SGD404m) is equivalent to SGD0.342/share. There is no change in the dividend policy to pay out 30% of its net profit. In 2012, the company paid an interim dividend of SGD0.130/share, 78% of its FY12 EPS.
Outlook: Seeing signs of improvement for large and ultra-large AHTS. The demand for subsea and construction vessels remains robust and management is seeing some signs of improvement in the enquiries for large and ultra-large anchor handling tugs and barges (AHTS). We expect the improvement to lead to more new orders for the company.
Valuation: Maintain BUY with a lower TP of SGD1.82. Following our earnings revision, we lower TP to SGD1.82 from SGD1.96 based on 12x FY13F P/E. Stock trades at 8.6x FY13F P/E, a steep discount to large-cap offshore names. Key downside risk to our view is a successful privatization of the company by Fincantieri.
Source: OSK
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