Inbox: Kaufempfehlung für SBO

Akt. Indikation:  34.80 / 35.15
Uhrzeit:  13:02:03
Veränderung zu letztem SK:  -1.20%
Letzter SK:  35.40 ( -0.42%)

RCB raised SBO  to BUY, TP EUR 85.0 - Share price correction creates new entry opportunity 

Contrary to the 3Q 17 preliminaries, which triggered a >20% rally of SBOs share price, yesterdays release of final third-quarter results caused a single-day share price correction of 7.3%. From a fundamental point of view, we find it difficult to explain yesterdays market reaction to SBOs final figures: in our opinion, the management comments during the earnings conference call were rather encouraging. Our fine-tuned DCF model yields a modestly higher 12-month target price of EUR 85.0 (EUR 83.0 previously) on the back of higher earnings estimates. With both the short-term and especially the long-term outlook for the oilfield equipment sector remaining positive, we decided to upgrade SBO to BUY from HOLD.

3Q 17 final results: Final quarterly numbers did not surprise the market with the reported earnings coming in broadly in line with preliminaries. The Advanced Manufacturing & Services (AM&S) segment posted a 4.3% increase of external revenues qoq (to EUR 27.2 mn) vs. +35% qoq in 2Q 17, while the segments clean EBIT margin stayed in the red at -23%. The Oilfield Equipment (OE) segment saw an impressive qoq increase of 31%, while its clean EBIT margin expanded to 28% vs. 18% in 2Q 17. As mentioned upon the release of preliminaries, SBO booked a non-cash-effective expense of EUR 89 mn, which comes under financial items and was triggered by the revaluation of SBOs option to buy out the remaining stake of 32% currently owned by minority shareholders of Downhole Technology.

Conference call key points: Although the fourth-quarter results might be to a certain extent impacted by the winter holiday season, the developments into 4Q so far are characterised as positive. In 2018, E&P spending is expected to continue to grow in SBOs core market, North America, by a low double-digit number, as well as internationally by low to mid-single digits. SBO was able to negotiate better prices on a number of oilfield equipment parts, which should support the improved operating margins going forward. Although the short labour arrangement in Ternitz/Austria should cease next January, the management is confident that higher capacity utilisation should absorb the additional fixed costs.