STX OSV

STX OSV: Nomura initiates coverage with Reduce Call, TP $1.68. Note that situational play on supersized offshore supply vessels, but order book replenishment key.
Expect OSV mkt to remain well-balanced contrary to expectations of over-supply, with potential for upside as new rig orders come through and lead to a pickup in OSV orders. Like co for its market-leading position in the high-spec OSV segment.

Competitive advantage lies in its track record of pulling off difficult projects, its ability to provide in-house designs to clients and its increasingly vertically integrated model, which allows cost and quality control.

But with order book replenishment a concern and valuations looking stretched, would look for more compelling levels before buying. Trades at FY12/13F P/E of 8.7x and 10.2x, on the high end of its forward P/E band of 4x and 9x, with negative EPS growth for both years on its declining order book.