STX OSV: Positive development for second Brazil shipyard (BUY)

Jason Saw (6232 3871, jason.saw@dmgaps.com.sg)

Secured environmental license in Brazil Re-iterate BUY.

of the year for a newbuild platform supply vessel (PSV) to an undisclosed customer and we

estimate that the three PSV orders are worth ~NOK0.9b. Additionally, the company also

announced that it has been granted the environmental license for a planned development of a

second shipyard in Brazil. This major milestone enables STX OSV to strengthen its market

leadership in Brazil and is a big step to make the NOK3b Transpetro orders effective. We

maintain our EPS estimates and at S$1.75 based on 12x FY11 P/E.STX OSV bagged its third contract

NOK3b Transpetro orders could be made effective soon.

construction of its second shipyard in Brazil in 2Q11 and the yard will be fully operational in

2013. In Jul 2010, STX OSV signed a contract to build eight LPG carriers for Transpetro but the

contract will only be effective upon (1) the approval of the environmental license and (2)

financing approval from Brazil’s Merchant Marine Fund (FMM). With the environmental license in

place, we expect the NOK3b Transpetro order to be made effective soon. The first LPG carrier is

scheduled for delivery in 2014 and the eighth to be delivered in 2016.STX OSV will proceed with the

NOK18b (US$3.3b) outstanding order book (excluding Transpetro orders).

newbuild order will be based on STX OSV’s own PSV 09 design and is scheduled for delivery in

2012 from its yard in Norway. We estimate the three orders YTD are worth NOK0.9b and STX

OSV has an outstanding order book of NOK18b. 1Q11 order wins were lower than 3Q10 (11

vessels NOK4.2b) and 4Q10 (six vessels NOK2.8b) but note that order wins can be lumpy and

we expect stronger order wins in the remaining three quarters of 2011. In our model, we have

assumed NOK12b (US$2.2b) new order wins in 2011.The latest

Valuation: Maintain TP at S$1.75.

catalysts are: (1) positive newsflow on new orders (2) execution improvement and (3)

successful start-up of its second shipyard in Brazil.We maintain TP based on 12x FY11 P/E. Key re-rating