Mermaid

Mermaid: After two years of losses, Mermaid has finally emerged from the depths, recording profits in FY12. Propelled by a burgeoning subsea order book as well as higher utilisation and day rates, the worst could finally be over according to CIMB. CIMB note that 4Q was 16% below house expectation (full year at 74%) due to higher taxes. EPS has been slashed by 40-44% as house conservatively erase drilling contributions which are not backed by announced contracts. Target price is unchanged after rolling forward to CY13 P/BV (still at 0.7x, its 3-year mean). Maintain Outperform with catalysts expected from a stronger subsea and shareholding certainty for Asia Offshore Drilling (AOD).