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STXOSV
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muifan
Master |
29-Jun-2011 23:44
Yells: "Take the leap of faith dont regret 20 years later!" |
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It will have at least one more wave to 1.50 minimum...from there on.. then its hard to predict...
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alexchia01
Elite |
29-Jun-2011 23:41
Yells: "Catch The Stars And Ride With Them" |
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This is the sign that STXOSV is getting ready for the next jump. Pretty positive from the view of a Technical Analyst. The next breakout is where all the Technical Analysts would jump on this bandwagon and I'm also one of them.
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Citigold
Senior |
29-Jun-2011 20:09
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It seem that stx had running out of steam, low volume today. | ||||
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yishun11
Member |
29-Jun-2011 15:58
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a healthy pullback!! | ||||
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bishan22
Elite |
29-Jun-2011 10:58
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Can never predict the market these days. Dont wait for massive sell down to occur and regret all profit being wipe off. Let those buying at 1.36 to earn the $2 target... erh i still got some to join them at $2. Heheh. Good luck. 
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starlene
Elite |
29-Jun-2011 10:38
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bishan22 I recalled U ever sold at 1.25....still got a lot to sell at 1.36..are'nt U holding for long term.JP Morgan Target $2   27 June 2011 STX OSV Holdings Ltd. Initiation Overweight STXO.SI, SOH SP An " OSV" leader amongst the crowd likely beneficiary of next leg of " offshore" capex? Price: S$1.30 Price Target: S$2.00 Singapore Ship Building & Repairs Ajay Mirchandani AC (65) 6882-2419 ajay.mirchandani@jpmorgan.com J.P. Morgan Securities Singapore Private Limited YTD 1m 3m 12m Abs 10.2% 7.4% 13.0% 64.6% Rel 16.0% 10.2% 13.3% 58.4% STX OSV Holdings Ltd. (Reuters: STXO.SI, Bloomberg: SOH SP) Nkr in mn, year-end Dec FY09A FY10A FY11E FY12E FY13E Revenue (Nkr mn) 11,895 11,881 12,388 12,951 14,116 Operating Profit (Nkr mn) 525 1,206 1,431 1,503 1,496 EBIT Margin 4.4% 10.2% 11.6% 11.6% 10.6% Net profit (reported) (Nkr mn) 95 1,031 992 1,047 1,048 Net Profit (rec) (Nkr mn) 95 797 992 1,047 1,048 Recurring profit growth -162.1% 739.2% 24.5% 5.6% 0.1% EPS (Nkr) 95.00 0.87 0.84 0.89 0.89 Attributable Equity (Nkr mn) 1,015 2,378 3,072 3,805 4,538 P/E (Recurring) nm 8.5 6.9 6.5 6.5 P/BV (x) nm 2.9 2.2 1.8 1.5 Dividend Yield nm 0.0% 4.4% 4.6% 4.6% ROE 10.5% 60.8% 36.4% 30.5% 25.1% Source: Company data, Bloomberg, J.P. Morgan estimates. Company Data Shares O/S (mn) 1,180 Market cap (S$ mn) 1,534 Market cap ($ mn) 1,238.50 Price (S$) 1.30 Date Of Price 27 Jun 11 Free float (%) 26.8% 3mth Avg daily volume 6.49 3M - Average daily Value (S$ mn) 7.85 FTSTI 3,067 Exchange Rate 1.24 See page 48 for analyst certification and important disclosures, including non-US analyst disclosures. J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. 0.7 0.9 1.1 1.3 S$ Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Price Performance STXO.SI share price (S$) FTSTI (rebased) Initiate with Overweight June-2012 SOTP-based PT of S$2, 54% upside: STX OSV Holdings, (net orderbook of ~US$2.7 bn as of 1Q11) is one of the major global high-end designers and developers of OSVs (Offshore support vessels), used in the offshore oil and gas E& P and oil services industries. The company's core products and services include (i) Complex and highly customized OSVs (AHTS, PSVs and offshore construction vessels), (ii) Others (icebreakers, coast guards) and (iii) vessel design and power and automation solutions Best positioned to benefit from return of " potential” OSV capex cycle STX OSV’s Brazil yard provides “long term” upside option: With 60-70 “newbuild” rigs orders since 4Q10, we believe the “next leg of offshore" orders are likely to come from OSV segment (more concentrated in PSVs, OSCVs in our view) given (i) “rule of thumb" of 2-4 OSVs per rig deployed and (ii) shorter delivery times (16-24 months for OSVs versus 30-36 months for rigs). We see STX OSV as key beneficiary. Moreover with its Brazil presence, it remains well positioned from order momentum in most key “offshore” markets. Operating Margins to surprise on the upside in FY11E / 12E While STX OSV’s legacy (loss making orders -- now been delivered) orders (AH Series, Bramax – chemical tankers) negatively impacted its margins in 2007-2009, we believe we are likely to see rising margin trend for STX OSV over period 2011-2012 (and likely to beat consensus estimates by 1.5-2% pp) on back of (i) improved delivery trends (leads to reversal of contingencies), (ii) rising % of “internal design” vessels (up from 45% in 2007 to 76% in 2010) and (iii) higher efficiencies and labor savings. Compelling ‘valuations’: STX OSV is trading at compelling valuations with a steep discount to its Singapore peers (trades at 6.9x FY11E PE versus Singapore yards at 14-16x). Key risks to its PT include: (1) steep fall in oil prices, (2) order cancellations and (3) execution risk 2 Asia Pacific Equity Research 27 June 2011 Ajay Mirchandani (65) 6882-2419 ajay.mirchandani@jpmorgan.com Company Description P& L sensitivity metrics (2011E) EBITDA EPS impact (%) impact (%) STX OSV Holdings, a wholly owned subsidiary of STX Europe (previously known as Aker Yards), is one of the major global high-end designers and developers of OSVs (Offshore support vessels), used in the offshore oil and gas exploration and production and oil services industries. It's core products and services include Complex and highly customized OSVs (Anchor handling tug supply vessel, platform supply vessels, offshore subsea construction). Revenue Assumption 12,388 12,388 Impact of additional 5% 5% 5% EBIT margin assumption 11.6% 11.6% Impact of each 1% 8.0% 8.5% Source: J.P. Morgan estimates Price target and valuation analysis Our price target is based on sum-of the-parts of the individual business segments namely Offshore & specialized vessels and its other business. We value the Offshore & specialized vessels business based on DCF valuation of existing orderbook at WACC of 10% with Annual order assumptions of NOK15 billion (US$2.7 bn) value the net cash (excluding customer advances) and taking a “20%” haircut on construction receivables to remain on ‘conservative’ side. We also discount cumulative capex of NOk 1 bn over the next tow years FY09A Revenue breakdown chart Our SOTP price target of S$2.0 equates to 10.6x / 10.0x FY11E/ FY12E earnings and 3.4x / 2.8x FY11E / FY12E book. Key risks to price target include: (1) steep fall in oil prices, (2) order cancellations and (3) execution Source: Company reports. risk EPS: J.P. Morgan vs consensus J.P. Morgan Consensus FY11E 0.84 0.78 FY12E 0.89 0.79 Source: Bloomberg, J.P. Morgan estimates Valuation table for key comparables Company Mkt Cap P/E (x) P/B (X) Dividend Yield (%) ROE (%) Net Gearing (%) (U$ mm) 10A 11E 12E 10A 11E 12E 10A 11E 12E 10A 11E 12E 10A 11E 12E Singapore STX 1,236 6.6x 6.9x 6.5x 2.9x 2.2x 1.8x 2.3% 4.4% 4.6% 60.8% 36.4% 30.5% 77% 72% 53% Keppel Corp 15,353 13.3x 13.6x 13.1x 2.8x 2.6x 2.4x 3.9% 3.9% 3.9% 22.3% 19.8% 18.8% Net Cash Net Cash Net Cash SMM 8,867 13.6x 16.1x 14.6x 4.2x 4.1x 3.9x 6.8% 5.4% 6.0% 38.4% 26.3% 28.1% Net Cash Net Cash Net Cash Korea Daewoo 7,806 10.7x 10.5x 11.9x 2.1x 1.8x 1.6x 1.1% 1.2% 1.1% 21.4% 18.4% 14.2% 49.4% 21.4% 11.4% Hyundai HI 30,260 7.0x 8.4x 8.8x 1.9x 1.8x 1.5x 1.6% 1.5% 1.4% 31.8% 24.7% 19.5% 20.4% 5.8% Net Cash Samsung HI 9,639 11.0x 11.4x 12.2x 2.6x 2.3x 2.0x 1.1% 1.1% 1.1% 26.7% 21.5% 16.8% 34.7% 15.2% Net Cash China Cosco Corp 3,481 18.5x 16.0x 14.6x 3.6x 2.9x 2.5x 1.6% 0.0% 0.0% 21.8% 22.5% 20.1% 7.0% Net Cash Net Cash Yanzijiang 4,512 9.5x 8.5x 8.2x 2.9x 2.4x 2.0x 3.1% 2.7% 2.8% 36.4% 29.4% 24.8% Net Cash Net Cash Net Cash Rongsheng 3,820 14.4x 5.7x 5.1x 1.8x 1.4x 1.1x 1.9% 1.8% 2.0% 23.4% 27.5% 24.3% 22.0% 29.0% 13.7% Malaysia Kencana 1,694 26.3x 23.7x 19.1x 6.2x 4.5x 3.5x 0.2% 0.6% 17% 23.0% 22.1% 20.6% 3.9% 3.8% 0.5% MMHE 4,315 39.5x 29.3x 28.7x 9.2x 5.7x 5.0x 0.0% 0.7% 0.7% 26.4% 25.8% 18.5% Net Cash Net Cash Net Cash Average 15.5x 13.6x 13.0x 3.7x 2.9x 2.5x 2.1% 2.1% 3.7% 30.2% 24.9% 21.5% 21.4% 14.2% 8.4% Source: J.P. Morgan estimates (Keppel, SMM, COSCO, MMHE, Rongsheng), Bloomberg consensus estimates [for others]. “” Kencana year end is July. Priced as of 27 June 2011. AHTS 43% PSV 17% OSCV 29% Other vessels 3% Others * 8% 3 Asia Pacific Equity Research 27 June 2011 Ajay Mirchandani (65) 6882-2419 ajay.mirchandani@jpmorgan.com Table of Contents Investment Summary ...............................................................4 Key Investment Risks ..............................................................6 Valuation Comparables............................................................8 Financial Assessment............................................................14 Order-book analysis...............................................................18 Financial Assessment............................................................20 Company overview.................................................................24 Sector overview : Offshore Support vessel .........................35 4 Asia Pacific Equity Research 27 June 2011 Ajay Mirchandani (65) 6882-2419 ajay.mirchandani@jpmorgan.com Investment Summary STX OSV Holdings, (previously part of Aker Yards), is one of the major global high-end designers and developers of OSVs (Offshore support vessels), used in the offshore oil and gas E& P and oil services industries. The company's core products and services include (i) Complex and highly customized OSVs (Anchor handling tug supply vessel, platform supply vessels, offshore construction vessels), (ii) Other vessels (LNG-powered ferries, coast guard vessels, Icebreakers and seismic vessels) and (iii) Vessel design and power and automation solutions Leading builder in high-spec OSVs alternate 'offshore’ play STX OSV likely to be “key beneficiary” when “offshore support” capex returns Since the last quarter of 2010, we saw a surge in orders for new-build rigs (jack-ups as well as deep water drillships). However we are yet to see any significant order activity with the offshore support vessels (AHTS as well as PSVs although we have see some strength in PSV ordering in recent months). Our discussion with various industry experts suggests that as a " rule of thumb" every rig needs 2-3 OSVs. STX OSV remains the ‘ideal’ play on this “potential” offshore capex theme given its leading market position, long history in the business and strong client relationship. Figure 2: Annual " new-build" rig orders(no. of rigs) Source: Riglogix, JPMorgan Research Figure 3: Annual " new-build" OSV orders (no. of vessels) Source: Clarkson , J.P. Morgan Research Margins likely to surprise on the upside for 2011-2012 While STX OSV’s legacy (loss making orders -- now been delivered) orders (AH Series, Bramax – chemical tankers) negatively impacted its margins in 2007-2010, we believe we are likely to see rising margin trend for STX OSV over period 2011- 2012 (and likely to beat consensus estimates) on back of (i) improved delivery, (ii) rising share of “internal design” vessels, (iii) higher efficiencies and labor savings. Figure 4:STX OSV : JPM v/s consensus (%) Source: Bloomberg, J.P. Morgan estimates Figure 5: STX OSV: Order backlog breakup by internal v/s party Source: Company, J.P. Morgan estimates Figure 6: Op Margins v/s Deliveries of internal design Source: Company, J.P. Morgan estimates 34 23 31 21 2 19 27 11 20 11 11 1 1 2 2 10 16 21 0 5 27 0 10 20 30 40 50 60 70 Jackups Semisubs Drillships 145 332 378 177 160 74 13 115 175 176 106 66 104 36 0 100 200 300 400 500 600 2005 2006 2007 2008 2009 2010 2011 - YTD AHTS PSV 12.6% 11.1% 11.6% 10.0% 12.8% 10.8% 11.6% 9.4% 0% 2% 4% 6% 8% 10% 12% 14% EBITDA margin EBIT margin JPM-2011E Consensus-2011E JPM - 2012E Consensus-2012E 78 57 43 49 45% 60% 77% 76% 0% 20% 40% 60% 80% 100% 0 20 40 60 80 100 FY07 FY08 FY09 FY10 Internal design orders 3rd party design orders Internal design as % of total orders 2.5% 5.3% 6.1% 7.5% 9.7% 5.9% 17.1% 10.5% 12.8% 0% 5% 10% 15% 20% 0% 20% 40% 60% 80% 100% 120% FY08 1H09 3Q09 4Q09 1H10 1Q10 2Q10 3Q10 4Q10 1Q11 Operating Margins (%) Total Deliveries based on " internal design" vessels (%) Figure 1: STX OSV market share and rank in major OSV segments % share, rank (As of 31 Dec 2010 for AHTS and PSV and 31 Aug 2010 for OSCV) Source: RS Platou, Company prospectus. Note: * OSCV includes saturation diving support vessels, pipe-laying support vessels, and remote operated vehicle support vessels. 36.4% 24.7% 6.6% # 1 # 1 # 2 0.0% 10.0% 20.0% 30.0% 40.0% AHTS (> 20K BHP) PSV (> 4,500 DWT) OSCV * 5 Asia Pacific Equity Research 27 June 2011 Ajay Mirchandani (65) 6882-2419 ajay.mirchandani@jpmorgan.com Don’t underestimate its Brazil presence STX OSV is one of few “leading international yards" with an “existing” Brazil presence (besides Keppel with its 100% owned BrasFels and Samsung Heavy's 10% stake in Atlantico Sul). Presence in Brazil becomes increasingly important as Petrobras increases “local content needs” and PBR accounting for over 50% of global deepwater capex. STX OSV initiated its Brazil shipyard operations in 2001 (current ‘annual’ capacity of 3-4 vessels) and is now planning to establish a new shipyard in Brazil in order to meet the increased demand for building more complex vessels in the country. As a result, on 20 May 2010, STX signed a JV agreement with its Brazilian partner, PJMR, to jointly invest US$100 million in this new yard over a period of three years. This yard, the construction of which is expected to complete by December 2013, will be located in the municipality of Ipojuca in the state of Pernambuco, has a size of 800,000 sq m and an estimated steel processing capacity of up to 20,000 tons / year. With this new yard, the combined capacity of both the yards in Brazil is expected to increase by additional four to five larger vessels (15,000 to 20,000 tons hull weight per year). To support this new yard expansion, STX OSV had secured contracts for eight LPG carriers with an aggregate value of US$536.3 million for delivery between 2013-2015. Attractive Valuations steep discount to comparable peers Compelling ‘valuations’: STX OSV is trading at compelling valuations with a steep discount to its Singapore peers (STX OSV trades at 6.9x FY11E PE versus Singapore yards at 14-16x). Interestingly not only is it trading at a substantial discount to its listed peers, but only trades at a fraction to its peers on multiple of market capitalization / orderbook. As we can see in Figure 9, STX OSV is by far the cheapest name in the region based on this specific multiple. However admittedly, this ratio should be adjusted for the operating margins, STX OSV still is a stand out candidate even after adjusting for this aspect. Figure 8:STX OSV versus Singapore listed yards : P/E , P/B x Source: J.P. Morgan Research Figure 9: STX OSV versus regional yards : Market Cap / Orderbook x Source: J.P. Morgan estimates 6.9 13.6 16.1 2.2 2.6 4.1 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 STX OSV Keppel SMM PE - FY11E P/B - FY11E 0.41 0.59 0.85 1.70 2.06 4.31 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 STX OSV Cosco YZJ Keppel SMM MMHE Figure 7: STX OSV: Brazil offshore support vessels market share % Source: Prospectus STX OSV, 45% Wilso n Guaru ja , 25% Alianc a, 20% TWB, 5% Navsh ip, 5% 6 Asia Pacific Equity Research 27 June 2011 Ajay Mirchandani (65) 6882-2419 ajay.mirchandani@jpmorgan.com Key Investment Risks Impending “potential” stake sale remains a key overhang News reports (source: Reuters) highlighted in April 2011 that STX OSV’s parent, STX Group is considering selling an additional 20% stake in Singapore listed STX OSV. Post this news report, we have seen STX OSV share price remain range bound. Muted outlook for AHTS “new-build” market in near term While admittedly our discussion with various industry experts suggests that as a " rule of thumb" 2-4 OSVs for every rig deployed, near term demand dynamics (especially for the AHTS market) remains muted. While spot rates remain on lower end, new orders (within high specification segment that STX OSV operates in) have been few. Figure 10: New Orders and delivery for AHTS> 16,000 bhp no. of vessels Source: Clarksons, Offshore Intelligence Weekly, Dec. 2010 Figure 11: North Sea AHTS(18,000+ BHP) spot data rates £/Day Source: Clarksons, Updated as June 2011 Moreover as we can see in chart below, with high specification AHTS concentration highest in North Sea, demand likely to remain muted in near term. Aging fleet but mainly within the “low end” vessels Given that STX OSV operates within the “high-end” OSV market, we believe looking at aging profile as well as OB/Fleet of the overall OSV market is misleading. Based on our analysis, while 42.5% of global AHTS as well as PSVs are over 25 years old, on closer analysis, we see that the " old fleet" is largely concentrated in the " low-end" or " smaller sized vessels where-in STX OSV does not operate in.Moreover the Orderbook / Fleet of the high vessels (large PSVs as well as large AHTS) is much higher than the segment's average. Figure 13: Aging profile of AHTS> 8,000 bhp (no. of vessels) Source: Clarksons, Offshore Intelligence Weekly, Dec. 2010 Figure 14: Aging profile of PSV> 3,000 dwt (no. of vessels) Source: Clarksons, Offshore Intelligence Weekly, Dec. 2010 11 5 4 7 13 10 19 29 3 5 17 30 57 15 1 4 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 0 10 20 30 40 50 60 2003 2004 2005 2006 2007 2008 2009 2010* Deliveries New Orders New Orders/Deliveries 0.00 20,000.00 40,000.00 60,000.00 80,000.00 100,000.00 120,000.00 1997-03 1998-10 2000-05 2001-12 2003-07 2005-02 2006-09 2008-04 2009-11 2011-06 North Sea AHTS Spot Day Rates- 18,000+ BHP > 25 years, 151, 25% 20-25 years, 10-20 years, 28, 4% 5-10 90, 15% years, 83, 14% less than 5 years, 255, 42% > 25 years, 11, 2% 20-25 years, 8, 2% 10-20 years, 78, 16% 5-10 years, 138, 28% less than 5 years, 258, 52% Figure 12No. of high specification AHTS per deep water rigs Source: Farstad, J.P. Morgan Research 3.0 0.8 7.1 2.2 2.2 6.0 0.0 2.0 4.0 6.0 8.0 Global US GOM North Sea Brazil West Africa Asia 7 Asia Pacific Equity Research 27 June 2011 Ajay Mirchandani (65) 6882-2419 ajay.mirchandani@jpmorgan.com Figure 15: Orderbook/fleet of AHTS no. of vessels Source: Clarksons, Updated as of May. 2011 Figure 16: Orderbook/fleet of PSV no. of vessels Source: Clarksons, Updated as of May. 2011 Figure 17: Historical fleet and orderbook/fleet ratio for Very large AHTS no. of vessels Source: Clarksons, Offshore Intelligence Weekly, Dec. 2010 Figure 18: Historical fleet and orderbook/fleet ratio for Very large PSV no. of vessels Source: Clarksons, Offshore Intelligence Weekly, Dec. 2010 Figure 19: AHTS: New orders vs. Rates Source: Clarksons Figure 20: PSV: New orders vs. Rates Source: Clarksons Competition from the “east” remains long term threat With majority of its yard being based in Norway (with hull outfitting done in Romania (where labor cost is more competitive), STX OSV is admittedly not the “cheapest” builder of OSVs. However STX OSV enjoys its competitive edge from (i) customized solutions, (ii) high specification orders and (iii) avoid mass-build orders. While this aspect of competition from Asian yards remains a “real significant” medium term threat, given STX OSV’s (i) strong client relationships, (ii) leading position in North Sea we see limited risk for now. 18.3% 0.0% 12.1% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 1996-01 1997-01 1998-01 1999-01 2000-01 2001-01 2002-01 2003-01 2004-01 2005-01 2006-01 2007-01 2008-01 2009-01 2010-01 2011-01 Orderbook/fleet as % of GT orderbook/fleet as % of no. 23.2% 11.5% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 1996-01 1997-01 1998-01 1999-01 2000-01 2001-01 2002-01 2003-01 2004-01 2005-01 2006-01 2007-01 2008-01 2009-01 2010-01 2011-01 orderbook/fleet as % of GT orderbook/fleet as % of no. 73 86 96 115 144 0% 20% 40% 60% 80% 100% 0 30 60 90 120 150 2006 2007 2008 2009 2010 Very Large > 16K bhp Fleet order book as % fleet 36.2% 91 111 128 163 182 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0 30 60 90 120 150 180 210 2006 2007 2008 2009 2010 Very Large > 4K dwt Fleet order book as % fleet 43.2% 42 51 57 27 50 52 40 69 113 145 332 378 177 160 74 0 10,000 20,000 30,000 40,000 50,000 60,000 0 50 100 150 200 250 300 350 400 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 New Contracts Spot rates (₤ /day ) 27 106 50 26 53 98 86 73 76 115 175 176 106 66 104 0 5,000 10,000 15,000 20,000 25,000 30,000 0 20 40 60 80 100 120 140 160 180 200 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 New Contracts Spot Rates (₤ /Day ) 8 Asia Pacific Equity Research 27 June 2011 Ajay Mirchandani (65) 6882-2419 ajay.mirchandani@jpmorgan.com Valuation Comparables Price-to-book: the key ratio to watch out for… STX OSV Holdings, a wholly owned subsidiary of STX Europe (previously known as Aker Yards), is one of the major global high-end designers and developers of OSVs (Offshore support vessels), used in the offshore oil and gas exploration and production and oil services industries. We have presented what we see are the key comparables to STX-OSV including (a) Singapore rig builders (b) Korean ship-builders and (c) Chinese ship-builders (moving into offshore) Table 1: Valuation table for shipbuilding and offshore/marine comparables Company Mkt Cap P/E (x) P/B (x) Dividend Yield (%) ROE (%) Net Gearing (%) (U$ mm) 10A 11E 12E 10A 11E 12E 10A 11E 12E 10A 11E 12E 10A 11E 12E Singapore STX OSV Holdings* 1,236 6.6x 6.9x 6.5x 2.9x 2.2x 1.8x 2.3% 4.4% 4.6% 60.8% 36.4% 30.5% 77% 72% 53% Keppel Corp 15,353 13.3x 13.6x 13.1x 2.8x 2.6x 2.4x 3.9% 3.9% 3.9% 22.3% 19.8% 18.8% Net Cash Net Cash Net Cash Sembcorp Marine 8,867 13.6x 16.1x 14.6x 4.2x 4.1x 3.9x 6.8% 5.4% 6.0% 38.4% 26.3% 28.1% Net Cash Net Cash Net Cash Average (Singapore) 11.2x 12.2x 11.4x 3.3x 3.0x 2.7x 4.4% 4.6% 4.8% 40.5% 27.5% 25.8% 12.8% 9.9% 8.0% Korea Daewoo 7,806 10.7x 10.5x 11.9x 2.1x 1.8x 1.6x 1.1% 1.2% 1.1% 21.4% 18.4% 14.2% 49.4% 21.4% 11.4% Hyundai H.I. 30,260 7.0x 8.4x 8.8x 1.9x 1.8x 1.5x 1.6% 1.5% 1.4% 31.8% 24.7% 19.5% 20.4% 5.8% Net Cash Samsung H.I. 9,639 11.0x 11.4x 12.2x 2.6x 2.3x 2.0x 1.1% 1.1% 1.1% 26.7% 21.5% 16.8% 34.7% 15.2% Net Cash STX Offshore 2,146 31.5x 16.8x 11.4x 1.4x 1.3x 1.2x 0.0% 0.8% 1.4% 4.6% 10.8% 14.6% 108.5% 104.9% 28.0% Hyundai Mipo 3,037 7.2x 7.5x 8.2x 0.8x 0.8x 0.7x 2.1% 2.1% 2.1% 13.3% 10.5% 8.9% Net Cash Net Cash Net Cash Average (Korea) 13.5x 10.9x 10.5x 1.7x 1.6x 1.4x 1.2% 1.3% 1.4% 19.6% 17.2% 14.8% 53.2% 36.8% 19.7% China COSCO Corp 3,481 18.5x 16.0x 14.6x 3.6x 2.9x 2.5x 1.6% 0.0% 0.0% 21.8% 22.5% 20.1% 7.0% Net Cash Net Cash Yangzijiang 4,512 9.5x 8.5x 8.2x 2.9x 2.4x 2.0x 3.1% 2.7% 2.8% 36.4% 29.4% 24.8% Net Cash Net Cash Net Cash China Rongsheng 1,664 7.3x 7.3x 6.8x 1.4x 1.2x 1.0x 2.0% 1.5% 1.6% 20.7% 17.4% 16.4% Net Cash na na Guangzhou 7,055 17.0x 15.2x 13.5x 2.8x 2.4x 2.1x 1.3% 1.2% 1.1% 17.5% 15.4% 14.5% na na na CSSC 3,718 323.5x 41.3x 23.4x 2.8x 2.5x 2.3x 0.0% 0.0% 0.2% 0.9% 5.7% 9.6% 39.8% na na COOEC 3,820 14.4x 5.7x 5.1x 1.8x 1.4x 1.1x 1.9% 1.8% 2.0% 23.4% 27.5% 24.3% 22.0% 29.0% 13.7% Average (China) 20.4x 15.7x 11.9x 2.5x 2.1x 1.8x 1.6% 1.2% 1.3% 20.1% 19.6% 18.3% 22.9% 29.0% 13.7% Malaysia Kencana Petro.** 1,694 26.3x 23.7x 19.1x 6.2x 4.5x 3.5x 0.2% 0.6% 17.2% 23.0% 22.1% 20.6% 3.9% 3.8% 0.5% MMHE 4,315 39.5x 29.3x 28.7x 9.2x 5.7x 5.0x 0.0% 0.7% 0.7% 26.4% 25.8% 18.5% Net Cash Net Cash Net Cash Average (Malaysia) 33.5x 32.9x 26.5x 23.9x 7.7x 5.1x 4.2x 0.1% 0.7% 8.9% 24.7% 23.9% 19.5% 3.9% 3.8% Overall Average 15.6x 14.9x 12.9x 3.1x 2.5x 2.2x 1.8% 1.8% 3.0% 24.3% 20.9% 18.8% 33.2% 27.1% 12.3% Source: Bloomberg, Company, J.P. Morgan estimates (STX,Keppel, SMM, Cosco, MMHE, Rongsheng) Bloomberg consensus estimates [for others], ** Kencana’s year end is July ** priced as of 27 June 2011. *Note: Net Gearing for STX is not adjusted for construction loans. … But don’t ignore price to earnings Given the cyclical nature of its business (where order flow remains the key share price driver), we believe price to book remains the key ratio to watch out for (in conjunction with return on equity). However order momentum remains critical else P/Bs become less relevant, in our view. However, we also believe price to earnings is an important valuation metric for investors given the earnings growth outlook and medium term order newsflow. In other words, in high growth markets (where P/B levels can go to 6-9x), we believe investors would focus on P/Es and be willing to pay a higher P/E multiple in scenarios of (a) earnings growth and / or (b) substantial order book momentum in near to medium term. Singapore yards closest comparables in our view given lack of listed peers 9 Asia Pacific Equity Research 27 June 2011 Ajay Mirchandani (65) 6882-2419 ajay.mirchandani@jpmorgan.com While STX OSV is a OSV builder (and not a rig-builder like KEP, SMM) we believe the Singapore are STX OSV’s closest comparables given: (a) Largely catering to offshore segment (b) While KEP, SMM cater to rig owners, STXOSV caters to suppliers of rig owners (c) Steel is a small component of ship cost just as in case of Singapore rig builders (d) Dominant global market position within the segments they operate in While admittedly STX-OSV’s closer peers would be AHTS / PSV builders such as Otto Marine, ASL Marine (trading at 8-10x ‘11E P/E and 0.7-0.8x ‘11E P/B) but given their (i) limited market share and (ii) lack of execution history we don’t see them as key comparables. Table 2: Margins v/s Return on Capital Employed v/s 2-year EPS CAGR comparison (%) Company EBITDA Margin EBIT Margin Net Margin Return on Capital Employed** EPS CAGR 2010 2011E 2012E 2010 2011E 2012E 2010 2011E 2012E 2010 2011E 2012E (10E-12E) Singapore STX OSV Holdings 11.2% 12.6% 12.8% 10.2% 11.6% 11.6% 8.7% 8.0% 8.1% 28.5% 26.8% 25.7% 0.8% Keppel Corp 19.9% 16.9% 16.5% 18.0% 15.6% 15.2% 16.6% 12.2% 12.2% 26.1% 24.2% 22.4% 1.0% SembCorp Marine 22.5% 17.0% 15.8% 20.7% 15.2% 14.2% 19.6% 14.1% 13.0% 36.3% 28.6% 30.8% -6.5% Average (Singapore) 17.9% 15.5% 15.0% 16.3% 14.1% 13.6% 15.0% 11.4% 11.1% 30.3% 26.5% 26.3% -1.6% Korea Daewoo 9.7% 10.0% 8.3% 8.4% 8.7% 7.3% 6.5% 6.6% 5.9% 16.7% 18.8% 15.4% -4.7% Hyundai H.I. 17.5% 16.2% 14.7% 15.4% 14.4% 13.0% 16.8% 14.5% 13.2% 20.7% 21.2% 17.5% -10.5% Samsung H.I. 9.9% 10.1% 9.1% 7.6% 8.0% 7.1% 6.8% 6.7% 6.3% 19.4% 20.3% 17.2% -5.1% STX Offshore & SB 5.8% 5.7% 6.3% 4.7% 5.7% 7.4% 1.9% 2.3% 3.4% 5.2% 22.3% 16.4% 61.9% Hyundai Mipo 15.6% 12.7% 11.4% 14.6% 12.2% 11.3% 12.1% 10.8% 10.1% 13.0% 11.9% 9.2% -6.5% Avg (Korea) – ex HHI & Hyundai Mipo 8.5% 8.6% 7.9% 6.9% 7.5% 7.3% 5.1% 5.2% 5.2% 13.8% 20.5% 16.3% 17.4% Average (Korea) 11.7% 10.9% 10.0% 10.1% 9.8% 9.2% 8.8% 8.2% 7.8% 15.0% 18.9% 15.1% 7.0% China COSCO Corp 16.1% 17.1% 17.5% 11.5% 12.6% 13.0% 6.4% 6.6% 6.9% 33.5% 34.8% 31.9% 12.4% Yangzijiang 22.2% 22.4% 20.4% 20.8% 20.5% 18.5% 22.9% 22.5% 20.1% 26.7% 23.5% 20.8% 7.8% China Rongsheng NA N/A N/A 8.6% N/A N/A 7.9% 9.6% 9.9% 50.8% N/A N/A 58.8% Guangzhou 8.4% 7.9% 7.7% N/A 5.7% 5.7% 10.1% 9.2% 8.9% N/A 9.5% 10.3% 4.0% CSSC 13.7% 14.0% 14.1% 8.8% N/A N/A 8.8% 10.1% 10.5% na na na 12.3% COOEC 15.7% 20.1% 18.5% 5.0% N/A N/A 1.2% 5.8% 7.4% 2.7% na na 264.0% Average (China) 15.9% 17.3% 17.2% 12.4% 17.9% 14.7% 10.5% 11.8% 11.7% 18.6% 22.5% 21.7% 61.4% Malaysia Kencana Petro. 18.2% 20.6% 20.0% 16.1% 18.6% 17.8% 12.5% 14.2% 13.6% 22.3% 30.8% 29.2% 17.5% MMHE 6.6% 9.6% 14.2% 6.2% 9.0% 13.3% 4.5% 10.2% 14.8% 31.4% 17.4% 15.4% 17.3% Average (Malaysia) 12.4% 15.1% 17.1% 11.1% 13.8% 15.5% 8.5% 12.2% 14.2% 26.8% 24.1% 22.3% 17.4% Overall Average 15.3% 15.8% 15.2% 12.9% 13.3% 12.8% 11.1% 11.1% 10.7% 20.3% 21.6% 19.1% 16.7% Source: Bloomberg, Company data, J.P. Morgan estimates (Keppel, SMM, Cosco, MMHE, Rongsheng). **RoCE defined as EBIT divided by ‘Equity plus Net Debt’, however if net cash taken Equity Margin profile, order outlook and gearing differentiates P/B for the yards On closer observation, the Big-3 Korean yards seem to trade at a steep discount on P/B basis (1.6-2.0x) as compared to the other ASEAN and comparable China yards (2.2-5.1x). While not directly relevant we believe it is important to highlight the key reasons for this especially given their (a) low P/Es and (b) solid RoE profile. We see 3 factors for a yard to trade at significant premium on P/B: (i) Margins: Korean ship-builders have 500-900 bps lower margins (primarily also driven by high cost of labor force) resulting in lesser premium to book. (ii) Order outlook: We see this aspect as key driver for premium to book. (iii) Gearing / RoCE: While gearing usually is RoE accretive (explaining Koreans’ solid profitability in spite of lower margins), we believe the business model is usually cash neutral to positive (customer usually funds construction) in such a scenario (especially with unclear order outlook) that leads to lower P/B in our view. 10 Asia Pacific Equity Research 27 June 2011 Ajay Mirchandani (65) 6882-2419 |
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bishan22
Elite |
29-Jun-2011 10:02
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Took half profit first at 1.36. Now just relax to enjoy the other half. Remember not to be greedy. Good luck.  | ||||
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iwonder
Veteran |
28-Jun-2011 23:22
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party just begin....enjoy the ride
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Noob79
Master |
28-Jun-2011 21:25
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i think so will up some more.... just look at PSL break the 0.29 and went up almost 30% from that price....
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upnowhere
Senior |
28-Jun-2011 21:21
Yells: "Just want to earn a bit pocket $$$" |
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will tomolo go up again? another few cents up? |
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catalyst
Senior |
28-Jun-2011 21:06
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Congrats to you bishan. Well deserved wait! You picked the right counter. Too bad I missed the boat coz no more bullet. Haiz..
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bishan22
Elite |
28-Jun-2011 17:33
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Enjoy the ride.            |
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muifan
Master |
28-Jun-2011 17:21
Yells: "Take the leap of faith dont regret 20 years later!" |
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yah me too...since upside no reason to run now.. very bullish counter... unless 1.40 prove to be super hard to break.. we shall see tmr :D
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susan66
Master |
28-Jun-2011 17:20
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I'm still holding on  since close high today. | ||||
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blueheat
Member |
28-Jun-2011 16:39
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Released all @ 1.36 in the morning.... Small profit  | ||||
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TalkMkt
Member |
28-Jun-2011 15:23
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JP Morgan Initiate coverage of STX OSV...  U can email me at tplim1975@gmail.com, if you wish to receive the full report... | ||||
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Citigold
Senior |
28-Jun-2011 13:38
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Indeed , if the next few days closing price above 1.36 shall confirm the chart showing stx osv breakout of the box .Will load more if the price did not dip below 1.36 for 5 days and will be better if the price dip further .Current price had broke 1st lvl resistance @1.20 and 2nd lvl iron wall resistance @1.26.Normally if the stock break 2nd lvl resistance,more upside is expected ,that why is call a  iron wall resistance.
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starlene
Elite |
28-Jun-2011 12:31
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Broke new high $1.36 hit 1.40 today with high vol..keep in cpf or load up $2 stock at least....see its related co stx pan ocean > $8...when it was tarded went below ipo same time wehn london's train was bombed bt terriorists...but not our stx osv never went below 79cts even with North Korea bomnbed S Korea and also Japan's earthquake didi not drop below ipo...alll analysts recommendation > $1.60
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alexchia01
Elite |
28-Jun-2011 11:43
Yells: "Catch The Stars And Ride With Them" |
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Yes. This is another of my favorite. I'm also wait for a pull back to add more position. I believe STXOSV would be like CoscoCorp... The star of the coming Bull Run.
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Citigold
Senior |
28-Jun-2011 11:35
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Sold all my STXOSV .re-enter again when the price dip again. |
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