Otto Marine: CIMB downgrades to Underperform, cuts target price to $0.30 from $0.48 after lowering FY11-12 earnings estimates by 31-23%. Changes reflect risk of more order cancellations by Mosvold, which accounts for 45% of shipbuilder's orderbook. Notes Mosvold's cancellation of its first anchor handling, towing & supply order dragged down Otto's share price in Apr; sees cancellation risks in Dec 10 & Jun 11.
Mosvold was set up during offshore & marine boom in 2007 as a pure and highly leveraged vehicle to own, operate high-end, large AHTS vessels but with its vessels under construction, Mosvold is not generating any operating cash flow. Stock has been on a downtrend since Jun but downside risks appears limited with a double bottom around $0.355.
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