En de rest van het KBC commentaar:
Unfavourable earnings base in 1H13. Turnkey Systems realized an exceptionally strong 1H13 performance
with an EBIT margin of 14.8% (2H13 was 9.7%). Furthermore, SBMO’s internal improvement program will
erode margins by 2.5-3% on Directional revenues (roughly $ 85-100m annually). We foresee 1H14 group
revenues of $ 1,755m (vs. $ 1,669m in 1H13) with EBITDA of $ 327m (vs. $ 434m), EBIT of $ 200m (vs. $
296m) with EPS of $ 0.59 (vs. $ 1.22 reported in 1H13).
• Order prospects SBMO started the year with 3 FPSO prospects for 2014 and 8 prospects for 2015 (‘fitting their
view on the market and scope’). With Total’s 2x Kaombo FPSO’s going to Saipem and SBMO being excluded
from Petrobras’ tenders for Tartaruga Verde and Libra, this basically means there are no prospects left for 2014.
SBMO’s backlog at y-e 2013 included $ 2bn in secured turnkey work for 2014 and $ 0.8bn for 2015, providing
around 18 months of visibility. SBMO’s CEO said in the 1Q14 call that the number of tenders they were working
on in-house has never been that high. Although the number of prospects for 2015 is encouraging, we think the
actual visibility for turnkey until mid-2015 provides uncertainty. We expect management to shed some light on
the market outlook beyond Brazil, given the increased amount of uncertainty for future work in this region for
SBMO. MODEC earlier this year stated that 13 out of their 19 prospective FPSO projects are located outside
Brazil. MODEC tends to operate in the same FPSO segment/scope as SBMO.
Although the 2013 Directional P&L account was re-stated in the 1Q14 update, we think 1H13 results still provide
a reasonable comparison base, mainly in Turnkey Systems. SBMO reported a 1H13 EBIT margin of almost
15% while their 2H13 reported EBIT margin was almost 10%. For 1H2014 we estimate an EBIT margin in
Turnkey Systems of 8.0%, impacted by the improvement program carrying additional costs of 2.5-3% of
directional revenues. For Lease & Operate we estimate EBIT of $ 125m translating into an EBIT margin of
23.6% (vs. 28.3% unadjusted EBIT margin in 1H13). We estimate EPS (Directional) of $ 0.59 which compares
to $ 1.22 (unadjusted) in 1H13. Our estimates are significantly below consensus, also for FY2014.
Investment case: We continue to see attractive value in SBMO as the current share price does not apply a fair
amount of value to future leases and the Turnkey Systems activities. We estimate the existing lease fleet (incl.
extensions) carries a value of € 10.7 per share, which is ahead of the current share price. We apply € 4.2 /
share to future leases and € 4.4 / share to Turnkey Systems, based on 7x EBIT of $ 180m. We also include an
in our view prudent $ 250m discount (or € 0.9 / share) for potential fines/penalties regarding the investigations
by the Dutch Openbaar Ministerie and US Department of Justice and € 0.9 / share for corporate/holding costs.
This brings us to our price target of € 17.5.
SBMO’s lease fleet will see some large contract additions (Paraty & Ilhabela in 2013-2014, Marica &
Saquarema in 2015-2016 and Stones in 2016), which should substantially enhance cash flows, according to our
estimates. This is illustrated by our 2016-2017E group EBITDA of >$ 900m and >$ 1.1bn compared to 2014E
EBITDA of almost $ 700m (all based on Directional reporting). Although there certainly are short term risks
such as 1) the outcome of the investigations and potential financial impact 2) SBMO’s position in future
Petrobras tenders 3) short term pipeline and order book, we believe the street has more than discounted those
risks in the current share price.