STX OSV

STX OSV: Morgan Stanley INITIATES COVERAGE with Equal Weight Call and $1.70 TP. House note that earnings profile unattractive, and order book unlikely to offer positive surprise. Expect earnings to decline 38%/5% in 2012/13 due to lower project recognition and narrower margins. Add that STX OSV needs to secure an additional NOK3.8bn of orders in 2012 and NOK12bn in 2013 to achieve earnings forecasts. Do not see upside risk to our order book and earnings estimates. House caution against optimism over upside to the share price due to multiple offers for the stake in STX OSV. See limited room for further price appreciation. Valuations are rich, in view, with the stock trading at 9.7x 2013e P/E, above its long-term average of 7.6x