STX OSV/ Vard

STX OSV/ Vard: Maybank KE initiated on Group with a BUY and TP of $1.66, pegged to 9x forward PE on average of FY13-15F earnings, indicating an upside of 35%; noting that Group deserves to trade at a premium to Asian OSV yards. The conclusion of its 50.75% stake to Fincantieri Group removes the overhang on share price, as house believes that the depressed valuations were offered due to the distressed financial position that the STX Group was in. Vard should re-rate positively to at least peer valuation levels. Noting mgmt's conservatism in its order win guidance, house also believes that the weakened ordering activity from 2H12 is short-term in nature and foresee a pickup towards 2H13, given the need for a more sophisticated and modern OSV fleet is ever increasing as offshore operations grow more complex. Near-term key leading indicator to watch is order win momentum, and Maybank KE forecast Nok9.7b for FY13 (Nok9.5b for FY12 and Nok11.1b for FY11). YTD order wins at ~Nok2-2.5b.