More to come
SBM fully deserves to remain on the Benelux favourites list after reporting strong results that bode further good news. Market circumstances remain solid, and earnings should advance while management has a clear vision. At a 24% discount to its SOTP of €20.34 per share with a clearly lowered risk YTD, we see SBM as attractive. We raise our TP from €17 to €19, with an upside of 23%.
Markets were positively surprised by SBM’s strong 1H13 numbers and raised guidance for the full year. However, more importantly, management is now almost in full control of the company, has a clear view on its direction; its 1H13 results are only a first proof of that. We believe that there is more good news to come, with one risk remaining, from improper sales practices.
We increase our EPS forecast from US$0.89 to US$1.55 for FY13, as favourable conditions should continue in 2H13. For FY14, we estimate US$2.79 per share compared with US$2.35 previously, and for FY15 we now have US$2.86 per share (US$2.45 previously). In this report, we also introduce our estimates based on directional reporting: we estimate adjusted 2013F-15F EPS at US$2.13, US$2.17 and US$2.30 per share, respectively. As management guides for dividend-based on directional reporting, we estimate the resumption of dividends over 2014 figures at US$0.87 per share (40% payout).
We keep SBM on our favourites list due to its strong performance YTD. The company benefits from a strong order book, whereas we believe more contracts are likely in FY14. So, the workload is at high levels good for its utilisation rate and returns. Also, management has the company under control, moving it towards a better business model and improving the quality of its contracts with clients and suppliers. Management has a clear vision for the company and its future, fully focusing on being the market leader in engineering and leasing FPSOs. Earnings are better; risks have diminished, certainly since YME has been settled. Based on a discount of 24% to SOTP of over €20, we believe that SBM’s share price offers attractive upside and we foresee that the share price will move towards the SOTP price, certainly when the compliance issue on improper sales practices is resolved. For our 12-month view, we still give a small discount to its SOTP, given this remaining issue. This leads to a TP of €19, up from €17 previously, which we believe is justified due to its strong outlook with more good news to come. In our view, fundamentally, SBM offers enough upside for us to maintain a BUY rating and keep it on our favourites list.
Forecasts and ratios (IFRS)
Year end Dec (US$m)
2011
2012
2013F
2014F
2015F
Revenues
3,159
3,826
4,359
4,739
4,914
Normalised EBITDA
811
698
729
1,054
1,110
Normalised net profit
(23)
(79)
316
579
595
Normalised EPS (US$)
(0.13)
(0.46)
1.55
2.79
2.86
Normalised PER (x)
n/a
n/a
13.4
7.4
7.2
EV/normalised EBITDA (x)
8.3
9.2
10.3
8.1
8.5
FCF yield (%)
n/a
n/a
n/a
n/a
n/a
Dividend yield (%)
0.0
0.0
0.0
4.2
4.4
Price/book (x)
2.7
2.4
2.1
1.6
1.4
Normalised ROE (%)
-1.3
-5.8
17.9
24.6
20.8
Source: Company data, ING estimates