- Beat expectations; maintain Outperform. 4Q10 core net profit of NOK282m (+54% yoy) trumped our expectation of NOK69m and consensus's NOK55m, thanks to stronger-than-expected sales and margins. As a result, FY10 core net profit of NOK816m forms 133% of our forecast. FY10 reported profit of NOK1,031m reflects higher financial income on the back of a reversal of losses posted in 2009 related to derivatives and hedges. While margins surprised nicely, we are keeping our EBITDA-margin assumptions – in line with guidance of 8-9%. As such, no change to our earnings estimates for FY11-12 and target price of S$1.60, based on 11x CY12 P/E (15% discount to rigbuilders' 5-year mean). We also introduce FY13 forecasts. We see catalysts from stronger-than-expected orders as well as strong quarterly results demonstrating steady execution.
- Strong results. 4Q10 revenue of NOK3.6bn was 20% above our expectation due to higher-than-expected work recognised. The group delivered five vessels in 4Q10, bringing FY10 deliveries to 21 vessels. We expect the delivery of 25 vessels in FY11. Gross/EBITDA margins were 29/11% vs. our 25/6% expectations, reflecting good project execution. Net gearing improved to 0.8x from over 2.0x in 3Q10, on the back of strong operating cash inflows and IPO proceeds.
- Order book of NOK17bn, with 49 vessels for delivery through 2013. The group had secured contracts for six new vessels worth NOK2.8bn in 4Q10. Order intake for 2010 was 27 vessels worth NOK12.6bn. We estimate that it will clinch NOK13.1bn of orders in FY11, inclusive of eight LPG carriers from Transpetro.
- Yards running near full capacity till 2012, with its Brazilian Niteroi yard at full capacity till 2013. Development of a new Pernambuco yard is on track. About 85% and 55% of our FY11-12 revenue forecasts are backed by the order book.
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