Ezra: CLSA downgrades to Underperform from Buy and slashes TP to $1.10 from $2.10, implying 10x FY12 P/E, 15% below its peers. CLSA expects more pain in the near term as the integration with AMC is progressing slower than the management had indicated, even though it likes Co’s long term positioning. The house estimates Ezra needs to recognize at least US$45m in subsea revenues in 4Q11 for AMC to break even for FY11; however, it only has one US$30m contract that it will partly be recognizing this qtr.
Estimate that it will post a US$5m loss in 4Q11. House lowers its FY11/FY12 forecasts by 52%/31%, but notes the subsea business should turn around in FY12 and Ezra's target of US$1b in net order book is achievable while Ezra''s core business will remain stable. Expect offshore support services revenues to grow by 50% over the next 3 yrs.
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