Rowan (Hold, TP: USD15.00) - Mind the cliff
Ahead of Q4 results (due on 28 February), our EBITDA forecast is 10% above consensus, due to a combination of our expectations of higher revenues and lower cost. Relative to other offshore drillers, we like Rowan on asset values. We also believe it will be able to push rates higher and achieve solid earnings on its special-capability jack-ups in the North Sea in 2018/19. However, it is set to face a significant earnings cliff in 2019e as we forecast EBITDA breakeven, down from around USD500m in 2017e. We also see risk related to soft dayrates on the ongoing tender from Saudi Aramco which may affect the rate level for potential extensions for its fleet with the client.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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