Subsea 7 (Hold, TP: NOK90.00) - PLSVs can no longer be ignored
In our view, the market is obsessed with Subsea7’s quarterly order intake, while the PLSV situation in Brazil is still under-estimated. We believe the four PLSVs contracted with Petrobras until 2021/2022 contribute more than USD200m in annual EBITDA, equal to c40% of Subsea7’s ‘cash EBITDA’ for 2019. The outlook for these PLSVs is the single-most important factor for the company’s future earnings. In our view, the industry PLSV situation in Brazil is unfolding as badly as it could, with vessels going idle and no appetite for second-hand transactions. We have downgraded to HOLD (BUY), with a NOK90 (105) target price.Subsea 7 is a provider of seabed-to-surface engineering, construction and services contractor to the offshore energy industry. Co. provides products and services required for subsea field development, including project management, design and engineering, procurement, fabrication, survey, installation, and commissioning of production facilities on the seabed and the tie-back of these facilities to fixed or floating platforms or to the shore. Co. also provides products and capabilities to deliver full Life of Field services to its clients. Through its i-Tech Division, Co. provides remotely operated vehicles and tooling services to support exploration, production and drilling activities.
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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