STX OSV 1Q revenue decreased by 12% YoY

Fair value S$2.00

1Q results within expectations
STX OSV reported 1Q12 results that were broadly in line with our and the street’s estimates. 1Q revenue decreased by 12% YoY to NOK2.8b (1Q11: NOK3.2b), while net profit attributable to shareholders fell by 13% YoY to NOK269m (1Q11: NOK310m). EBITDA and operating margins remained largely unchanged at 14.0% and 12.9% respectively. During the quarter, the group delivered five vessels and secured contracts for four vessels, bringing its net order-book to 53 vessels as of quarter-end.

NOK16b order-book
Although its order-book declined slightly to NOK16.0b (end 2011: NOK16.7bn), the new orders (i.e. 2 AHTS and 2 OSCVs) comprise larger and
more complex vessels, signaling a possible rebound in activity for high-end offshore vessels. Should this trend persist, STX OSV would be well-positioned to secure new orders given its market leadership in constructing highly specialized vessels.

Improved outlook
According to STX OSV, vessel demand for the subsea support and construction segments continues to be strong, supported by increased offshore activity and increased backlog for subsea contractors. Charter rates for large AHTS have also continued to rise. The financing climate has somewhat improved over the past quarter, although concerns over the economic situation in the eurozone still persist.

Maintain BUY with lower fair value
We updated our model with the 1Q12 results and lowered our contract win assumptions to NOK11b from NOK13b previously (contracts secured ytd: ~NOK4b). To account for the uncertainty over the eurozone, we also tweaked our valuation peg to 9x (previously 9.7x). Maintain BUY with lower fair value estimate of S$2.00 (previously S$2.25).