Otto Marine said that its wholly-owned subsidiary, Surf Subsea Pte Ltd will be taking a 19.2% stake in the US-based Joint Venture company, SURF Subsea Inc, which procured 292-feet Class 2 DP MSV at a “distressed” price of US$55m. The acquisition will enable Otto to gain a foothold in the North America mkt. The vessel is well-equipped with ROV capability that allows Otto to expand into subsea and offshore construction works, thus creating more growth opportunities for its new biz segment.
Meanwhile, there is no material impact to our FY10-12 EPS forecasts as we await for more concrete details from the mgmt. Despite market concern over potential vessel cancellation, we reckon that Otto’s integrated business model can provide alternative options such as redeploying the vessel for the group’s chartering business. To replenish its order book, management is actively targeting higher-spec newbuild contracts worth betweeen US$100-200m. Reiterate BUY with SOTP target price of S$0.58.
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