STX OSV

STX OSV: Citi maintains Conviction Buy on inexpensive FY12-13E P/E 8x a 20-30% peer avg. Expects order activity to pick up into year-end, following the mid-year vacation season. Recent conversation with mgmt reveals that demand for high-value construction vessels remains healthy, with the company actively engaged in negotiations for several units at present. Substantial dividend payouts in FY11 and 1H12 (payout ratio of 51% and 128% respectively), in our view, was largely driven by a ‘cash call’ from STX OSV’s parent. potential for further out-sized dividends down the road should not be ruled out if 51% stake share takes longer to materialize