STX OSV

STX OSV: Announced good set of 2Q11 result which was in-line.
Rev at Nok 2,744m, -22% yoy and -14% qoq, while Net Profit at Nok 272m, -21% yoy and -12% qoq. EBIT margins was better then expected at 15.3% vs 5.9% yoy and 12.8% qoq.

Rev was down, driven by slower rev recognition seen in the qtr, however EBIT margins was much better than expected at 15.3% vs estimates of 11.6% for FY11, which boosted bottom-line. Mgt highlighted that FY11E EBITDA margins likely to be above 1H11 levels. Details are however still scatchy, as mgt conference call with analysts is only due today at 10am.

Going forward, JP Morgan remains upbeat on Co. with O/w call. Note that Co. best positioned to benefit from return of potential OSV capex cycle and STX OSV’s Brazil yard provides ‘long term’ upside option. With 60-70 newbuild rigs orders since 4Q10, believe the next leg of offshore orders are likely to come from OSV segment. STX OSV with its Brazil presence, remains well positioned from order momentum in most key offshore mkts.
At current price, valuations are compelling; with grp trading at 6.8x FY11E PE vs SG yards at 12-13x. JP Morgan has O/w call and $2.00 TP, DBSV maintains Buy with $1.90 TP and DMG reiterate Buy Call with $2.00 TP.