Kreuz

Kreuz: Positive momentum continues after the grp announced that it has secured subsea installation contracts worth US$25m. Work for this contract, which will be executed in Asean, is scheduled for immediate commencement with estimated completion by 4Q13. We note that grp’s share price has been gaining positive momentum lately, with analysts expecting FY13F earnings likely to beat the FY12 record. Order book current stands at approx. US$230m (vs US$155m FY12), of which the bulk is likely to be recognized in FY13F. (FY12 rev@ US$193m.) Furthermore, variation orders or unannounced contracts which are not shown in their order books can be quite material, so by looking at Kreuz’s order book alone you may underestimate the financial results of the firm. Kreuz’s tenderbook is currently around US$500m out of which there may be new order wins in the near term. FY15F is likely to be another growth year when its new build vessel arrives. Kreuz is building a US$113.65m deepwater subsea construction vessel via a Chinese shipbuilder. This vessel will be equipped with dynamic positioning and would enable Kreuz to compete in deepwater projects with leading subsea contractors such as Subsea 7 and Technip. Valuations are compelling, with Kreuz trading at 4.7x FY13F PE vs the average FY13F PE of 9.7x) with the highest ROE (Kreuz: 29.4% vs the average ROE of 12.6%). UOB Kay Hian maintains Buy with $0.68 TP.