Subsea 7 (Buy, TP: NOK180.00) - Set for earnings turnaround
We expect an earnings recovery to start unfolding in Q3, with EBITDA of USD194m, the best since 2018. We are in line with consensus on H2e but more skewed towards Q4e, with our Q3e EBITDA 4% below company-compiled consensus. We believe the net working capital build is behind us, but expect capex to remain a drag on cash flow in H2 and into 2024, with 2025 the first year with solid cash flow (13% yield to equity we estimate). The stock continues to trade at low multiples (3.9x 2-year forward EV/EBITDA versus 5.3x historically). We reiterate our BUY and NOK180 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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