SBX - Excellent play on structural growth in OBS and...........
SB1M er ute med en oppdatering på SBX i dag, hvilket nok er grunnen til at denne aksjen er såvidt sterk. De har kursmål 0,40 og skriver blant annet følgende:
"SBX (Buy, TP NOK 0.40) - Initiation of Coverage: Excellent play on structural growth in OBS and cyclical recovery in 2D seismic
Conclusion
We believe Seabird is an excellent way to play the structural growth we see in Ocean Bottom Seismic (OBS) as well as a cyclical recovery in 2D seismic. The company's refinanced balance sheet, niche market positioning and recent strengthening of the management and BoD also enables attractive growth opportunities in our view. A recent example of this is the acquisition of Geowave Voyager from CGG at what we consider to be a highly attractive price. The operational leverage in Seabird is very high, and only small market improvements results in high EBITDA growth. We estimate EBITDA of USD 33m in 2020, based on four active vessels and a normalization of utilization and day rates, which translates into a fair value of NOK 0.40 per share in our valuation. We find the risk reward in Seabird attractive and initiates coverage with a BUY recommendation and NOK 0.40 target price.
Our analysis
• Seabird is an attractive way to play the structural growth in OBS: Seabird Exploration is a global player in the 2D and source niche seismic markets, where the core end market for source work is Ocean Bottom Seismic (OBS) surveys. Although we expect the recovery in the seismic market as a whole to continue, we see higher spending growth in OBS than conventional streamers, driven by lower acquisition costs and desire for higher quality data. Third party sources estimate that the OBS market will grow to above USD 1bn in 2018 and double to USD 2bn in 2021, which compares to USD 750m actual spend in 2017 and USD 400m in 2016. Although we expect the supply/demand fundamentals and pricing for OBS will increase, there is yet no clear technology winner, with fierce competition on recent awards to companies like Magseis, Fairfield and Seabed Geosolutions. An alternative and indirect way of playing this market growth is through source vessel providers, which is a niche segment that has been has been ignored by the seismic industry. Seabird is among the market leaders in this segment. Most of Seabird's vessels have been allocated to source work in recent quarters, and we expect continued high source allocation as well as increased utilization and day rates on the back of increasing demand.
• Cyclical recovery in 2D seismic – Potential opening of US a massive trigger: Seabird's other core segment, 2D seismic, is arguably the most cyclical of the sub-segments within seismic, as it is purely exploration driven. 2D seismic is the first tool when exploring in new areas due to much lower cost than 3D seismic, but has been extremely out of favor the past few years due to low exploration appetite. We do however expect a cyclical recovery in the demand for 2D seismic, as exploration spending is set to rebound. The combination of an oil price above USD 70/boe and low replacement ratio bodes well for increased exploration spending. We also note that a drop in exploration spending historically always have been followed by a double digit growth in the following years, which we believe will be the case this time as well. With regards to geographical demand, a potential opening of large underexplored areas offshore U.S. serve as a massive 2D demand trigger for Seabird. As main competitor Chinese BGP is not licensed to operate in the US, Seabird is the only dedicated 2D operator which can operate in the region. We see contracts from TGS as the most likely, as TGS has a history for using Seabird on 2D projects. A large TGS survey in the US could potentially book up all of Seabird's vessels for a long time.
• Refinanced balance sheet, niche market positioning and new management and BoD enables attractive growth opportunities: After the refinancing in 2017, Seabird only has USD 5.5m in non-amortizing debt due in Q2'20. With a low debt burden and balance sheet strengthening after recent equity issues, Seabird is well positioned to take advantage of growth opportunities in the market. Seabird's niche positioning in markets considered non-core for the majority of the other seismic players, also enables interesting opportunities. A good example is the recent acquisition of Geowave Voyager from CGG at what we consider to be a very attractive price (around 80% discount to age adjusted newbuild cost). The vessel's primary markets are considered non-core for CGG while Seabird also agreed to only use up to 6 streamers (capacity of 10) on potential future 3D jobs, which means the vessel will not compete in CGG's core 3D market. Lastly, we believe the ability to do attractive deals increases with the new key members of the management and BoD which now are in place (including new CEO), on the back of extensive industry experience and an opportunistic approach towards growth.
• High operational leverage makes stock very cheap in a recovering market: The operational leverage in Seabird is very high, meaning only small improvements in utilization and day rates results in high EBITDA growth. Due to the difficult markets, the company is not yet EBITDA positive (we expect negative USD 2m EBITDA in Q2), but we expect positive EBITDA from Q1'19. Looking towards 2020, we expect utilization to improve from today's 50% to historical average of 70% and day rates to improve from USD 40-45k/day to USD 70k/day. Based on 4 of 5 vessels in the current fleet achieving this performance on average, we estimate EBITDA generation of USD 33m. At today's pricing, this translate into a very low pricing of P/E 3x and EV/EBITDA below 1x. Based on historical 12m forward EV/EBITDA of 4.2x, we calculate a discounted equity value of NOK 0.40/share, which we set as our target price. We find the risk-reward in Seabird attractive and initiate coverage with a BUY rating.
Analysts
Tommy Johannessen"
"SBX (Buy, TP NOK 0.40) - Initiation of Coverage: Excellent play on structural growth in OBS and cyclical recovery in 2D seismic
Conclusion
We believe Seabird is an excellent way to play the structural growth we see in Ocean Bottom Seismic (OBS) as well as a cyclical recovery in 2D seismic. The company's refinanced balance sheet, niche market positioning and recent strengthening of the management and BoD also enables attractive growth opportunities in our view. A recent example of this is the acquisition of Geowave Voyager from CGG at what we consider to be a highly attractive price. The operational leverage in Seabird is very high, and only small market improvements results in high EBITDA growth. We estimate EBITDA of USD 33m in 2020, based on four active vessels and a normalization of utilization and day rates, which translates into a fair value of NOK 0.40 per share in our valuation. We find the risk reward in Seabird attractive and initiates coverage with a BUY recommendation and NOK 0.40 target price.
Our analysis
• Seabird is an attractive way to play the structural growth in OBS: Seabird Exploration is a global player in the 2D and source niche seismic markets, where the core end market for source work is Ocean Bottom Seismic (OBS) surveys. Although we expect the recovery in the seismic market as a whole to continue, we see higher spending growth in OBS than conventional streamers, driven by lower acquisition costs and desire for higher quality data. Third party sources estimate that the OBS market will grow to above USD 1bn in 2018 and double to USD 2bn in 2021, which compares to USD 750m actual spend in 2017 and USD 400m in 2016. Although we expect the supply/demand fundamentals and pricing for OBS will increase, there is yet no clear technology winner, with fierce competition on recent awards to companies like Magseis, Fairfield and Seabed Geosolutions. An alternative and indirect way of playing this market growth is through source vessel providers, which is a niche segment that has been has been ignored by the seismic industry. Seabird is among the market leaders in this segment. Most of Seabird's vessels have been allocated to source work in recent quarters, and we expect continued high source allocation as well as increased utilization and day rates on the back of increasing demand.
• Cyclical recovery in 2D seismic – Potential opening of US a massive trigger: Seabird's other core segment, 2D seismic, is arguably the most cyclical of the sub-segments within seismic, as it is purely exploration driven. 2D seismic is the first tool when exploring in new areas due to much lower cost than 3D seismic, but has been extremely out of favor the past few years due to low exploration appetite. We do however expect a cyclical recovery in the demand for 2D seismic, as exploration spending is set to rebound. The combination of an oil price above USD 70/boe and low replacement ratio bodes well for increased exploration spending. We also note that a drop in exploration spending historically always have been followed by a double digit growth in the following years, which we believe will be the case this time as well. With regards to geographical demand, a potential opening of large underexplored areas offshore U.S. serve as a massive 2D demand trigger for Seabird. As main competitor Chinese BGP is not licensed to operate in the US, Seabird is the only dedicated 2D operator which can operate in the region. We see contracts from TGS as the most likely, as TGS has a history for using Seabird on 2D projects. A large TGS survey in the US could potentially book up all of Seabird's vessels for a long time.
• Refinanced balance sheet, niche market positioning and new management and BoD enables attractive growth opportunities: After the refinancing in 2017, Seabird only has USD 5.5m in non-amortizing debt due in Q2'20. With a low debt burden and balance sheet strengthening after recent equity issues, Seabird is well positioned to take advantage of growth opportunities in the market. Seabird's niche positioning in markets considered non-core for the majority of the other seismic players, also enables interesting opportunities. A good example is the recent acquisition of Geowave Voyager from CGG at what we consider to be a very attractive price (around 80% discount to age adjusted newbuild cost). The vessel's primary markets are considered non-core for CGG while Seabird also agreed to only use up to 6 streamers (capacity of 10) on potential future 3D jobs, which means the vessel will not compete in CGG's core 3D market. Lastly, we believe the ability to do attractive deals increases with the new key members of the management and BoD which now are in place (including new CEO), on the back of extensive industry experience and an opportunistic approach towards growth.
• High operational leverage makes stock very cheap in a recovering market: The operational leverage in Seabird is very high, meaning only small improvements in utilization and day rates results in high EBITDA growth. Due to the difficult markets, the company is not yet EBITDA positive (we expect negative USD 2m EBITDA in Q2), but we expect positive EBITDA from Q1'19. Looking towards 2020, we expect utilization to improve from today's 50% to historical average of 70% and day rates to improve from USD 40-45k/day to USD 70k/day. Based on 4 of 5 vessels in the current fleet achieving this performance on average, we estimate EBITDA generation of USD 33m. At today's pricing, this translate into a very low pricing of P/E 3x and EV/EBITDA below 1x. Based on historical 12m forward EV/EBITDA of 4.2x, we calculate a discounted equity value of NOK 0.40/share, which we set as our target price. We find the risk-reward in Seabird attractive and initiate coverage with a BUY rating.
Analysts
Tommy Johannessen"
Redigert 20.01.2021 kl 18:55
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