Continues to impress (DBS)

  1Q13 earnings in line on track for another growth year

 

adding assets should reap benefits over the cyclePrudent balance between chasing growth and pace of

  Still cheap at just 6x FY13F PE despite strong run

  Maintain BUY with a higher TP of S$0.78

Highlights

Another quarter of solid earnings execution

US$10.8m (up 5% y-o-y) was in line with expectations, on the back

of 1.4% revenue growth to US$49m. 1Q net profit amounts to 24%

of our full year estimates. Gross margin improved to 32.1%.. 1Q13 net profit of

Our View

Subsea sector fundamentals continue to be robust

market is expected to be one of the brightest spots in offshore O& G

services, backed by an increase in the development of oil and gas

fields in deeper waters /harsher environments and development of

marginal fields which need tie-backs to existing infrastructure.

Current orderbook stands at US$200m, largely unchanged from last

quarter, and underpins revenues for the next 12 months. We

estimate YTD contract wins of around US$60m, including variation

orders and unannounced contract wins, on track to meeting our fullyear

new order win estimate of US$150m.. The subsea

May exercise option for another MSV

contract with a Chinese shipyard for the construction of a state-ofthe

art multi-purpose support vessel and has the option of indicating

interest to order one more within 6 months. It may make sense for

Kreuz to exercise this option, since the newbuilding price is relatively

cheap, and Kreuz may be able to bid competitively for global SURF

projects against bigger players like Subsea 7 and Technip, when

these vessels are delivered 2-3 years down the line. Funding is not an

issue, with balance sheet now in healthy position.. Kreuz recently inked a

Recommendation

Maintain BUY.

while being prudent not to be too aggressive currently with asset

acquisitions. This ensures Kreuz does not have to take on low margin

contracts just to ensure high fleet utilisation, and reduces the cyclical

effects of the O& G industry to an extent. Thus, Kreuz remains one of

our top picks in the sector. TP raised to S$0.78, pegged to a higher

multiple of 8x FY13 earnings, given its solid track record and long

term sustainable growth strategy.Kreuz continues to execute on its growth strategy