26.08.2016

Zugemailt von: Baader Bank (BSN-Hinweis: Lauftext im Original des Aussenders, Titel (immer) und Bebilderung (oft) durch boerse-social.com aus dem Fotoarchiv von photaq.com)

Downgrade to Sell SBO

    We downgrade SBO from Hold to Sell. We keep our target price unchanged at EUR 46. We calculate with an oil price between USD 45 and USD 55 for the next two years. This implies that the SBO customers will remain reluctant when it comes to new orders in the coming quarters. But after winding down inventories and keeping up production, they have to order again. We expect that this will start during 1H17.

    The 1H16 report indicated no improvement. In the related call the management was very cautious regarding the development during the rest of the year. The order intake shows almost no sign of any improvement, so far. 1H16 sales reached EUR 88mn (53% down yoy) despite the integration of Downhole. The operating EBIT came in with EUR -31.2mn vs. EUR 19.3mnthe year before. Order intake was down 28.4% in 1H16. 

    Positive operating FCF. Despite the massive decline of the top line and a negative operating result, SBO was able to generate a positive operating FCF of EUR 18.5mn. The operating FCF was driven by a further reduction of operating costs, lower net working capital and the cut of capex to an absolute minimum. The reported FCF was negative with EUR -76mn because of the acquisition of Downhole.

    Valuation: Our target price of EUR 46 is based on a DCF model. The underlying assumption is a slight recovery of the market during 2017. And with the reduced operating leverage and a higher share of the more profitable oilfield equipment segment, we modelled that SBO is able to generate EBIT margins above 20% from 2019 onwards. When it comes to multiples based on consensus estimates, the 2017 figures remain outstandingly high with an EV/EBITDA of ~11 and a P/E of ~38.

    Risk to our recommendation. Any decision of the OPEC to cut production or any other political scenario which drives the oil price well above the USD 50 line might be supportive for the SBO share price.

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SBO

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