Company Name: STX OSV HOLDINGS LIMITED
| Research House: MacQuarie | Price Call: BUY | Target Price: 2.16 |
Macquarie starts STX OSV at Outperform with $2.16 target. The house expects the OSV market to remain skewed toward the high-spec segment, with STX OSV the global market leader.
“With 10 yards in four countries which are the hotbed of OSV activity and long-lasting relationships with all top Norwegian contractors, STX OSV is in a sweet spot.”
It says ultra-deepwater oil exploration has led to an increase in complexity and vessel intensity, and Macquarie expects the OSV building cycle has legs despite short-term oversupply concerns. It estimates 2012-13 order flows will improve to NOK12.5 billion ($2.7 billion) and NOK14 billion respectively from 2011's NOK11 billion,noting sustainable margins have improved to 12%-14% from 2009's 5%.
“STX OSV has the strongest balance sheet amongst its peers, highest FCF generation and highest ROEs. This allows the company to distribute handsome dividends to its shareholders. However, we think investors are ignoring the above and unjustifiably comparing STX OSV with the low-end OSV players listed on the Singapore exchange.”
It tips a strong case for a valuation re-rating. The stock is +4.3% at $1.58.
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