CIMB starts Otto Marine at Outperform with $0.47 target price based on 10x FY11 P/E. Says with marine group''s shipbuilding business still in early phase of recovery, earnings growth expected to be driven by ship chartering, geophysical services. But expects increasing shipbuilding enquiries to translate into firm orders, backed by easing financing conditions, stabilizing oil prices and group’s ability to build largest class of offshore vessels.
Bullish on chartering business which provides recurring cash flows, high gross margins of about 50%. Notes Otto has secured $409m worth of new chartering contracts for next 5-10 years and recent acquisition of company providing seismic services, which involve surveying seabed for hydrocarbons will expand its service range and gives it access to Oceanic region.
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