Otto Marine

Otto Marine: Could see negative sentiment on stocks, after Co. reported 4Q10 results which missed bottom-line estimates, with Rev at $93.3m, -13%YoY and +16%QoQ, while Net Loss was at $9.2m vs a Net Profit of $9.7mYoY and $8.7m QoQ. Result brings FY10 Rev to $579.8m, +36.4%YoY, while Net Profit at $40.6m, -22.3%YoY….

Poor bottom-line performance was negatively impacted by one-off items, with an aggregate value of $46m, namely Net foreign exchange loss of $22.4m, and a $23.6m loss due to the reversal of profits recognized for the terminated sale contracts for vessels sold to a customer and an associate. Had Grp not been impacted by one-off items, Core Net Profit for FY10 would have been 113.3% higher at $86.6m, ahead of FY10 consens estimates of $63.1m…

Grp note that it has begun to benefit from its strategy of growing its contribution from chartering, leasing and specialized offshore services. For FY10, aggregate gross profit from these segments was $33.7m, representing an almost three-fold increase from that of FY09, (40% of FY10 Gross Profit), vs 15% in FY09, while ‘shipbuilding segment’ registered a 19%YoY increase in rev due to higher rev recognition…..

Operating expenses for Grp more than doubled to $63.8m in FY10, mainly due to increase in FX loss and increased staff costs due to fleet expansion and new businesses. Going forward, grp plans to continue building a strong chartering platform as they diversify frm ship building and has secured new orders worth US$83m for three vessels in FY10….

We note that at current price, valuations appear high, with grp trading at 14.5x FY10 PE vs more attractive peers of STX OSV of 5.3x and ASL Marine of 8.3x, with grp’s shipbuilding segment continuing to be plagued by an over supply of OSV’s in the global market. DMG Maintains Neutral Call with $0.35 TP.