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
Labels: Ezion Holdings, Ezra, Jaya Holdings, STX OSV