Kruez

Kruez: UOB Kay Hian maintains Buy with $0.45 TP. Note that Kreuz has obtained approval-in-principle from the SGX-ST to transfer from the SGX-ST Catalist to the SGX-ST Main Board. Expect the transition to be completed within 4Q12. Vessel acquisition. Kreuz intends to seek a mandate from shareholders to acquire a vessel. Kreuz is currently in negotiations with a China-based shipbuilder to construct a multipurpose subsea dive support and construction vessel, which is estimated to cost between US$100m and US$120m. The proposed acquisition will be satisfied in cash via a combination of loans from financial institutions and cash flow from operations. Vessel delivery is expected in 2015. House peg PE valuation to the offshore support vessel (OSV)-owner segment instead of offshore contractors due to the former’s longer track history. PE valuation for Kreuz is 5.6x 2013F EPS of 8.2 US cents (10.3 S cents), 1-SD below the long-term PE mean of 9.6x for the OSV-owner segment. P/B peg is 0.7x 2013F book value of 37 US cents (46 S cents). The discount in both valuation metrics is attributable to Kreuz’s large trade receivables (52% of total assets as of 30 Jun 12).