Mermaid: CIMB downgrade to Neutral from O/p. House view the cessation of CEO, Mr Denis Welch negatively, although tip no adverse impact on business operations or radical change to general course of the Co. is expected, a perceived lack of direction for Co. is damaging.
In addition, while valuations are compelling (0.4x P/BV), believe that Mermaid would at best, perform in line with market amid negative sentiment. TP based on 0.5x CY11 P/BV, bottom end of its trading range. Recommend investors to re-visit the stock only upon better clarity on the strategic direction of Co, better-than-expected qtrly performances or favourable contracts for its newbuild jack-ups.