Technics Oil & Gas

Technics Oil & Gas: Technics surprised on the downside this quarter, with revenue coming in a third below expectation and achieving a breakeven performance at the bottom line. OSK DMG are cutting our revenue forecast by 15%, while reducing EPS forecast by 10%. House downgrades Company to NEUTRAL with a TP of $0.95, based on 11x forward P/E. Big revenue miss, but gross margin up to 44% from 37%. The first and last quarters of the financial year are typically the weakest with the monsoon season preventing offshore work, but the $11.2m showing is weaker than the seasonally-adjusted $17m expectation, after factoring in the loss of revenue from deconsolidating the Norr Offshore Group (NOG). On the bright side, margins improved to 44% as a result of a stronger mix of high-margin EPCC contracts. Other costs generally in line, the main contributor to the dismay earnings was due to the lack of revenue recognition.