STX OSV

STX OSV: DBSV maintains Buy, but reduces TP to $1.54 vs $1.90 previously. Cite Counter as ‘Down but not out’. Note that longer term fundamentals intact and despite the recent sell down, STX OSV remains well positioned to benefit from a recovery in the newbuild cycle.

In house view, the drivers supporting a recovery in demand for newbuild OSVs remain intact, with latest background checks indicating that enquiry levels remain healthy, with a stable pipeline of potential orders. Order momentum hit by macro uncertainties. However, in the near term, the ongoing economic uncertainty and skittish capital markets continue to cloud visibility on the timing of orders.

Industry checks reveal a generally more protracted process in finalizing an order. With 3 months of 2011 left and only NOK5bn of orders in the bag, our view for a stronger 2H 2011 for order wins seem increasingly unlikely. House trims FY11-13 order wins assumptions by 17-19% on possible order deferments, leading to a 4%/10% cut in FY12/13F. Highlight that 48% of revised FY11 order wins assumption is backed by secured orders, rising to 80% once the Transpetro and Island Offshore orders are made effective