Subsea 7 (Buy, TP: NOK120.00) - More compelling risk/reward
With the share price and EV down 18% and 20% YTD, respectively, Subsea 7 has been one of the worst-performing oil service names in our coverage universe. Although order intake has improved, contract values have been soft, in line with our thesis but disappointing compared to consensus. Competition on new jobs is very high and we expect margin pressure going forward; we find long-term consensus too high. Still, at the current valuation we have upgraded the stock to BUY for the first time since we assumed coverage last year as we now see more compelling risk/reward for the shares. The target price remains NOK120.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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