We increase the carrying value of DEME in our SOTP model, reflecting the winning of the € 916m Wheatstone contract. The impact adds about € 40m to adjusted equity value, hence we increase our TP on AvH from € 65.0 to € 67.0 and decided to stick to our Buy rating.
News:
DEME was awarded the contract to dredge the approach channel, manoeuvring area and the berths for Chevron’s Wheatstone LNG project, Australia. We refer to CFE’s contribution in today’s morning note for a more detailed overview of the contract.
Our View:
DEME last year acquired the Gladstone LNG project (first three contracts worth a total A$ 925m) in joint-venture with Van Oord. While 2011 was hit by losses on the Santos project, DEME managed to expand its order book from about € 1.93bn at the start of 2011 to € 2.26bn at end-September. Including the Wheatstone LNG project, we estimate today’s order book at approx. € 2.7bn to 2.8bn, with the bulk of the contract translating into our number no sooner than 2013 and running up until 2015. We assumed € 30m in revenues (DEME 100%) in 4Q12 and about € 250m p.a. for the next three years. The contract’s impact on our valuation is clearly positive and adds approx. € 40m to our estimated value of AvH’s stake from € 691m to € 733m (27.7% of NAV).
Conclusion:
This is positive news for DEME/AvH. Combining an increase of the estimated DEME value with an overall improvement of valuation multiples in the Private Banking segment, we decided to increase our TP from € 65.0 to € 67.0 (which implies a 15% discount to target equity value). Despite the upside potential currently amounts to 10%, we stick to our Buy rating as we believe Ackermanscontinues to offer very good value and further upside, despite a continuously uncertain macro-economic climate.