Exploration wave returns!

– Based on our increased EPS estimates for 2010 and beyond, we raise our target price to EUR 43.6 (after EUR 40.5). Due to the firm’s demanding valuation level and increased doubts regarding the global recovery, we stick to our Hold recommendation.

– SBO delivered a very convincing set of figures for 2Q10. At EUR 82.3mn, new orders stabilized at the high level delivered in 1Q10. The EBIT margin rose sequentially by another 350bp to 12.6%, thanks to improved capacity utilization.

– 1H10 operating cash flow rose substantially, by 155.8% to EUR 39.0mn. Consequently, net debt dropped to just EUR 24mn, bringing the gearing ratio to a very low level of 9%. Management intends to use the comfortable financial position to further pursue its organic and acquisitive growth strategy.

– Management gave a positive outlook and CEO Grohmann indicated that new order development so far in 3Q10 have been friendly. We conclude from this statement that investors can expect new orders for 3Q10 at a high level similar to that seen in 2Q10.

– The global macro picture seems to be worsening. China’s tight monetary policy is producing its first results, reflected in slowing industrial activity, while reliable leading indicators for the US economy (ECRI and CMI) point toward a cooling off of the US economy in the quarters ahead. We therefore stick to our generally cautious view.