Monday, February 21, 2011

Otto Marine off 6.7%; orderbook risk

Stock Name: Otto Marine
Company Name: OTTO MARINE LIMITED
Research House: DMG

Otto Marine (G4F.SG) is down 6.7% at $0.280, falling sharply for the second straight session in heavy volume after its 4Q results Friday showed a loss of $9.3 million.

DMG downgrades the stock to Sell and cuts its target price to $0.25 from $0.335. “The shipbuilding segment was the biggest drag...with a gross loss of $12.2 million due to the reversal of profit and forex loss. Excluding those items, we estimate the shipbuilding segment would have turned in a gross profit of around $10 million.” 

The house reduces its FY11F-FY12F net profit estimates by 39%-43% respectively due to lower new shipbuilding order assumptions. BNP Paribas, which has a Reduce rating and $0.34 target, says the risk to its earnings estimates is skewed to the downside, as the current order book has high customer concentration risk and still faces potential cancellation risks.
“The imbedded risk factors are increasing, given the wide spread of unrelated operations,” it says. Orderbook suggests a $0.270 floor for the session. 

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