(BUY, S$1.265, TP S$2.00)
Strong results; special interim dividend. 1H11 reported net profit of NOK582m (flat YoY) was ahead of expectations, accounting for 61% of ours and 67% of consensus estimates. STX OSV surprised us with a special interim dividend of 5cents to be paid in 3Q11. Management also provided positive guidance on orders and margins in 2H11. Following the results: (1) we raise our FY11-12F net profit by 21-23% on higher margins assumptions; (2) upgrade our TP to S$2.00 (old: S$1.89) based on 9.1x FY12F EPS, 30% discount to the average P/E for big-cap rigbuilders. We remain positive on the stock as management continues to deliver strong operational performance and STX OSV is well positioned to benefit from an upcycle in demand for high-end offshore vessels. Re-iterate BUY.
Boost from high margins; strong margins to continue into 2H11. 2Q11 adjusted net profit (exclude fair value gains from derivatives and other financial income) came in at NOK272m (-7% QoQ, +109% YoY). The higher-than-expected net profit was attributed to exceptionally strong EBITDA margins of 15% vs. our full-year EBITDA margins forecast of 11.5%. Management is confident of surpassing its annual revenue achieved in FY10 (NOK11.9b) and is guiding 2H11 EBITDA margins to be not less than 1H11 margins. We have revised our FY11-12F EBITDA margins to 15% and 14% respectively (old: 11.5%).
Positive order momentum. (1) 2Q11 order intake came in at NOK3.1b vs. NOK1.2b in 1Q11; (2) Outstanding order book stood at NOK15.3b. (3) 36 vessels out of the 51 vessels in the order
book are based on STX designs. Order book is made up of 32xPSV/MRV, 11xAHTS, 2xOSCV and others (6 units). We believe slots for delivery in 2012 are nearly full (possible room for one more vessel) and we expect new orders in 2H11 to be delivered in 2013 and 2014.
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