FRA DNB Engelske analyser

BW OFFSHORE A buying opportunity Q4 EBITDA was only 3% below our estimate and consensus, but this was more than offset by higher operating cash flow and lower capex. Risk related to Catcher again looks to be in the rear-view mirror, providing some upside potential to our SOTP. While we are still awaiting an extension of Abo and execution in Gabon, we continue to see room for dividends from 2020 and find yesterday’s underperformance unwarranted. BUY and NOK40 target price maintained.
Solid cash flow in Q4. Revenue and EBITDA were just 3% below our forecast and consensus, achieving operational uptime of 100% on the FPSO fleet. Operating cash flow was solid in the quarter, mainly due to working capital releases, leaving net debt (including swaps) 8% lower than we expected. Our 2018–2020e estimates are largely unchanged following the report.
No surprises on Catcher. Management said its latest capex estimate for the Catcher FPSO is “well within” the budget of USD1.2bn, providing some ~5% upside potential to our SOTP. Going forward we see limited residual risk related to the operation of Catcher.
Limited fleet updates. Negotiations for extending Abo are still ongoing, but we believe ENI will ultimately extend the unit. Berge Helene is being mobilised to Singapore in preparation for redeployment, and we see potential for a long-term FPSO in West Africa, potentially being a good fit for this unit.
Longer-term dividend potential. Given our FCF and deleveraging assumptions over the next few years, we believe an expected 2018–2019 refinancing could leave room for dividends. In a refinancing scenario, we estimate it could pay annual dividends of USD70m–80m, equivalent to a ~9% yield at the current share price.
BUY recommendation maintained. Our NOK40 target price is based on our SOTP, while other valuation metrics suggest further upside potential. At our target price the stock would trade at a 2019e EV/EBITDA of 3.3x, well below its historical average.