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Shared By Stock Fanatic on Friday, January 4, 2013 | 4.1.13

What does the Fincantieri offer imply about OSV’s prospects?

The low-ball offer by Italian cruise shipbuilder Fincantieri suggests that prospects for the OSV sector may not be as strong as originally thought. Amid the differing views, we see the OSV sector as being in a mid-cycle, where normalised profits and ROEs can be eked out.

Together with a two-year earnings CAGR of 34% through to 2014 (aggregate basis) and a resumption of OSV recovery in 2013 balanced against mean-valuations, we find little reason to be overly-bearish. We maintain Overweight on the sector. Our stock ratings, earnings forecasts and target prices are intact. We also use this opportunity to highlight Jaya. Taking the pulse on the global OSV sector

In our view, the global OSV sector has clearly emerged from the bottom. However, its recovery hit a snag in 2012, after 2-3 years of steady improvements. With global OSV utilisation hovering at the mid-toupper 80% levels and dayrates some 50% off peak, we think that the OSV segment is in a mid-cycle. Looking further, we disagree that the OSV market has peaked and expect a resumption of OSV recovery in 2013, alongside increased rig activity.

Outlook & trends
In terms of asset classes, we are most bullish on high-end Anchor Handling Tug Supply vessels (AHTS). In particular, the ultra-large AHTS fleet has been flat over the previous two years. We expect charter rates and a newbuild cycle for ultra-large AHTS to pick up in 2013.

We are also positive on the subsea market, despite strong newbuild activity in 2012. Subsea players are writing record-order books while tendering activity remains high. Hot spots are Brazil, the North Sea, West & East Africa and Australia.

We are cautious of Platform Supply Vessels (PSVs), especially the higher-end segment. Although the PSV market is the segment which we expect the strongest demand, we are also seeing the highest order book. 

Stocks best poised to ride out the mid-cycle
Going into 2013, companies which have an exposure to high-end AHTS or deepwater subsea are the main beneficiaries. Among our coverage, Ezra, Jaya and STX OSV are riding the correct trends. Lastly, we also like Ezion, albeit for different reasons. (Read Report)

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Source : CIMB Research

Posted on Friday, January 4, 2013 | 4.1.13

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