Worst times should be over
– Based on significantly higher EPS estimates for 2010 and 2011, we raise our target price to EUR 27.2
(previously EUR 18.2). We consequently upgrade our recommendation from Sell to Hold.
– We believe that SBO’s 2Q09 order intake should mark the low point of this deep recession. Even though
SBO’s operating result in 2Q09 was burden by restructuring costs (a single-digit EURmn amount) and
the processing of raw materials purchased at peak prices, the EBIT margin was still at 8.2%.
– The 1H09 operating cash flow of EUR 15.2mn was at a healthy level. Net debt stood at EUR 89.2mn,
bringing the gearing ratio to a sound level of 38.5%. Thus, SBO is in a healthy financial position and
there is no need for investors to fear dilution or insolvency.
– For the time being, it is difficult to properly assess when demand for oilfield equipment will recover.
However, we do not doubt that this will happen within the next 12-24 months.
– We consider SBO a good vehicle to benefit from an upturn in the oilfield equipment industry, given the
strong track record of its management team and good market position as a niche player in a high-end
market. In the last cycle, SBO rewarded its investors with a very strong peak EBIT margin level of 24%.
