Subsea 7 (Sell, TP: NOK115.00) - Downturn visible in earnings
Following several quarters with excellent earnings (partly thanks to its late-cyclical exposure and strong execution), Q3 marked a shift. We estimate underlying SURF margin (ex PLSV) at c17% (half of H1 2017) and management talked down future margin expectations. While higher order intake could be positive, it is widely expected, and we rather see focus shift to earnings and margins. We have cut our recommendation to SELL (HOLD) and cut our target price to NOK115 (120).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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