Otto Marine

Otto Marine's 2Q10 results were broadly in line with market and our expectations. On a six mths basis, net profit of $41.2m has already accounted for almost 55% of our full yr estimates.Excluding one-off items, core earnings would have come in strongly at about $36m, blowing past our estimates. In particular, the forex loss of $19.7m was mainly due to the sharp depreciation of Euro during the period. The decline in 2Q revenue to $129.7m (-26% yoy, -53% qoq) did not came as a surprise to us given the lumpy recognition of shipbuilding order. On the other hand, associates’ income of $3.3m jumped more than five-fold in tandem with the enlarged JV chartering fleet. We are leaving our forecasts and SOTP target price of $0.58 unchanged. In the near-term, we see potential share price catalyst such as announcement of a major shipbuilding contract that will replenish its current order book of US$180m (or S$243m). BUY.