STX OSV Holdings Limited

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www.dbsvickers.com Refer to important disclosures at the end of this report ed: JS / sa: YM BUY S$1.20 STI : 3,168.54 (Initiating Coverage) Price Target : 12-Month S$ 1.86 Reason for Report : Initiating coverage Potential Catalyst: New order wins Analyst Jeremy THIA +65 6398 7974 [email protected] Price Relative 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 Nov-10 Feb-11 May-11 S$ 19 69 119 169 219 Relative Index STX OSV Holdings Limited (LHS) Relative STI INDEX (RHS) Forecasts and Valuation FY Dec (NOK m) 2010A 2011F 2012F 2013F Turnover 11,881 12,439 13,794 14,277 EBITDA 1,330 1,415 1,505 1,542 Pre-tax Profit 1,534 1,320 1,397 1,414 Net Profit 1,031 896 949 960 Net Pft (Pre Ex.) 722 896 949 960 EPS (S cts) 19.5 17.0 18.0 18.2 EPS Pre Ex. (S cts) 13.7 17.0 18.0 18.2 EPS Gth Pre Ex (%) 29 24 6 1 Diluted EPS (S cts) 19.5 17.0 18.0 18.2 Net DPS (S cts) 2.9 5.1 5.4 5.4 BV Per Share (S cts) 45.0 59.1 72.0 84.7 PE (X) 6.2 7.1 6.7 6.6 PE Pre Ex. (X) 8.8 7.1 6.7 6.6 P/Cash Flow (X) 5.5 6.3 5.9 5.8 EV/EBITDA (X) 6.2 5.8 5.7 6.0 Net Div Yield (%) 2.4 4.2 4.5 4.5 P/Book Value (X) 2.7 2.0 1.7 1.4 Net Debt/Equity (X) 0.8 0.6 0.5 0.6 ROAE (%) 60.8 32.6 27.4 23.2 Consensus EPS (S cts): 17.3 17.6 16.9 No. of brokers following: B: 7 S: 0 H: 0 ICB Industry : Oil & Gas ICB Sector: Oil Equipment; Services & Dist Principal Business: STX OSV is a leading global builder and designer of advanced, high-spec offshore support vessels. Source of all data: Company, DBS Vickers, Bloomberg At A Glance Issued Capital (m shrs) 1,180 Mkt. Cap (S$m/US$m) 1,416 / 1,143 Major Shareholders STX Norway AS (%) 68.3 Leading Inv and Sec Co Ltd (%) 4.9 Morgan Stanley (%) 4.8 Free Float (%) 22.0 Avg. Daily Vol.(‘000) 7,063 DBS Group Research . Equity 23 May 2011 Singapore Company Focus STX OSV Holdings Limited Bloomberg: SOH SP | Reuters: STXO.SI Poised for the next wave Specialised builder of complex, highly customized OSVs. Well positioned for new orders with commanding market share in high-spec OSVs and yards in Brazil. Improving execution and efficiency gains underpin 15% FY10-12F earnings CAGR. Unwarranted discount to peers; initiate with BUY, +55% upside to TP of S$1.86. Leading builder of specialized OSVs. STX OSV specialises in the construction of complex and specialised vessels used across the offshore services industry. It is the largest builder of AHTS of >20,000 BHP and PSVs of >4,500 DWT, with a global market share of 30.8% and 18.0% respectively. New orders to drive performance. We believe new vessel orders will drive share price performance, underpinned by asset replacement demand, deepwater E&P activities and a projected 18% growth in contracted rig count by end 2011. We assumed FY11 order wins of NOK13bn vs. YTD order wins of NOK5.5bn (including the 8 Transpetro LPG carriers to become effective upon funding approval). Current orderbook stands at NOK19.4bn, with deliveries up to FY16 and a book-to-bill ratio of 1.3x. Reinforcing commanding presence in Brazil. The group is building on its leading 45% market share in Brazil with the development of a second yard, to commence operations by mid-2012. Once in full operation, it will be able to deliver 4-5 larger vessels a year, boosting its Brazilian capacity by 2.7-3x. Improving project execution. Despite full yard utilisation till late 2012/early 2013, improved project execution and efficiency gains are expected to result in superior EBITDA margins of >10% over FY11F-12F, supporting FY10-12 recurring earnings CAGR of 15%. Undemanding valuations, initiate with BUY and S$1.86 TP. We initiate coverage on STX OSV with a BUY recommendation and TP of S$1.86, pegged to 11x blended recurring FY11/12 PE. At 7x FY11 PE, STX OSV trades at an unwarranted discount to peers, with valuations supported by steady earnings growth and a dividend yield of 4.2-4.5%. Risks include poor project execution, lower than expected order wins, and share overhang from potential placement by the parent.

Transcript of STX OSV Holdings Limited

Page 1: STX OSV Holdings Limited

www.dbsvickers.com Refer to important disclosures at the end of this report ed: JS / sa: YM

BUY S$1.20 STI : 3,168.54 (Initiating Coverage) Price Target : 12-Month S$ 1.86 Reason for Report : Initiating coverage Potential Catalyst: New order wins Analyst Jeremy THIA +65 6398 7974 [email protected]

Price Relative

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Relative Index

STX OSV Holdings Limited (LHS) Relative STI INDEX (RHS)

Forecasts and Valuation FY Dec (NOK m) 2010A 2011F 2012F 2013F

Turnover 11,881 12,439 13,794 14,277 EBITDA 1,330 1,415 1,505 1,542 Pre-tax Profit 1,534 1,320 1,397 1,414 Net Profit 1,031 896 949 960 Net Pft (Pre Ex.) 722 896 949 960 EPS (S cts) 19.5 17.0 18.0 18.2 EPS Pre Ex. (S cts) 13.7 17.0 18.0 18.2 EPS Gth Pre Ex (%) 29 24 6 1 Diluted EPS (S cts) 19.5 17.0 18.0 18.2 Net DPS (S cts) 2.9 5.1 5.4 5.4 BV Per Share (S cts) 45.0 59.1 72.0 84.7 PE (X) 6.2 7.1 6.7 6.6 PE Pre Ex. (X) 8.8 7.1 6.7 6.6 P/Cash Flow (X) 5.5 6.3 5.9 5.8 EV/EBITDA (X) 6.2 5.8 5.7 6.0 Net Div Yield (%) 2.4 4.2 4.5 4.5 P/Book Value (X) 2.7 2.0 1.7 1.4 Net Debt/Equity (X) 0.8 0.6 0.5 0.6 ROAE (%) 60.8 32.6 27.4 23.2 Consensus EPS (S cts): 17.3 17.6 16.9 No. of brokers following: B: 7 S: 0 H: 0 ICB Industry : Oil & Gas ICB Sector: Oil Equipment; Services & Dist Principal Business: STX OSV is a leading global builder and designer of advanced, high-spec offshore support vessels.

Source of all data: Company, DBS Vickers, Bloomberg

At A Glance Issued Capital (m shrs) 1,180 Mkt. Cap (S$m/US$m) 1,416 / 1,143 Major Shareholders STX Norway AS (%) 68.3 Leading Inv and Sec Co Ltd (%) 4.9 Morgan Stanley (%) 4.8 Free Float (%) 22.0 Avg. Daily Vol.(‘000) 7,063

DBS Group Research . Equity 23 May 2011

Singapore Company Focus

STX OSV Holdings Limited Bloomberg: SOH SP | Reuters: STXO.SI

Poised for the next wave • Specialised builder of complex, highly customized OSVs.

• Well positioned for new orders with commanding market share in high-spec OSVs and yards in Brazil.

• Improving execution and efficiency gains underpin 15% FY10-12F earnings CAGR.

• Unwarranted discount to peers; initiate with BUY, +55% upside to TP of S$1.86.

Leading builder of specialized OSVs. STX OSV specialises in the construction of complex and specialised vessels used across the offshore services industry. It is the largest builder of AHTS of >20,000 BHP and PSVs of >4,500 DWT, with a global market share of 30.8% and 18.0% respectively.

New orders to drive performance. We believe new vessel orders will drive share price performance, underpinned by asset replacement demand, deepwater E&P activities and a projected 18% growth in contracted rig count by end 2011. We assumed FY11 order wins of NOK13bn vs. YTD order wins of NOK5.5bn (including the 8 Transpetro LPG carriers to become effective upon funding approval). Current orderbook stands at NOK19.4bn, with deliveries up to FY16 and a book-to-bill ratio of 1.3x.

Reinforcing commanding presence in Brazil. The group is building on its leading 45% market share in Brazil with the development of a second yard, to commence operations by mid-2012. Once in full operation, it will be able to deliver 4-5 larger vessels a year, boosting its Brazilian capacity by 2.7-3x.

Improving project execution. Despite full yard utilisation till late 2012/early 2013, improved project execution and efficiency gains are expected to result in superior EBITDA margins of >10% over FY11F-12F, supporting FY10-12 recurring earnings CAGR of 15%.

Undemanding valuations, initiate with BUY and S$1.86 TP. We initiate coverage on STX OSV with a BUY recommendation and TP of S$1.86, pegged to 11x blended recurring FY11/12 PE. At 7x FY11 PE, STX OSV trades at an unwarranted discount to peers, with valuations supported by steady earnings growth and a dividend yield of 4.2-4.5%. Risks include poor project execution, lower than expected order wins, and share overhang from potential placement by the parent.

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STX OSV Holdings Limited

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Analysts Jeremy Thia +65 6398 7974 [email protected]

Table of Contents

Investment Summary 3

SWOT Analysis 4

Company Background 5

Leading builder of complex, highly 8 customised OSVs

Network of yards strategically located within 12 key and growing oil and gas markets

Leveraging off dominant presence in Brazil 14 with second yard

STX OSV is well positioned to benefit from 15 several industry trends

PSVs leading the rebound in OSV orders 19

Segmental Analysis 21

Key Risks 23

Quarterly / Interim Performance 24

Financials – Income Statement 25

Financials – Balance Sheet 26

Financials – Cash Flow 27

Financials – ROE Drivers 28

Valuation 29

Appendix 30

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Investment summary Leading builder of complex and customised OSVs. STX OSV is one of the major global shipbuilders specialising in the construction of complex and highly customised offshore support vessels (OSVs) such as anchor handling tug supply (AHTS) vessels, platform supply vessels (PSV), advanced offshore subsea construction vessels (OSCV), as well as other specialized vessels. It is the largest builder of AHTS of >20,000 BHP and PSVs of >4,500 DWT, with a global market share of 30.8% and 18.0% respectively. It has delivered >200 offshore and specialized vessels since 2000. One of few high-end OSV yards with in-house vessel design capabilities. STX OSV is one of the few high-end OSV shipbuilders with its own in-house vessel design and engineering capabilities. It is ranked 1st and 2nd for the number of PSVs >4,500 DWT and AHTS >20,000 BHP being built based on its in-house designs. As such, its orders are typically secured by invitation of customers than competitive bidding, ensuring a certain degree of pricing power. Strategically located yards can deliver 23-25 vessels a year. The group has 9 strategically located yards in operation: 5 in Norway, 2 in Romania and 1 each in Brazil and Vietnam, enabling it to maintain its competitive advantage in innovation, cost efficiency, manufacturing flexibility, while leveraging off its close proximity to key offshore oil and gas markets to tap on regional opportunities and expand its customer base. Depending on the mix of vessel types and vessel sizes in the orderbook, it is able to deliver between 23 and 25 OSVs a year. While there are plans to expand the launch facility in the Tulcea yard in Romania, this initiative will only commence once there is a project in place which demands such infrastructure support. Reinforcing Brazil market share with second yard. In anticipation of the robust local Brazilian demand for OSVs, STX OSV is developing a second shipyard in Pernambuco, Brazil. This second yard is expected to reinforce the group’s commanding position in Brazil where it has a market share of 45%. The new yard is scheduled to commence operations in mid-2012 with the construction of a series of 8 LPG carriers for Transpetro, for delivery over 2014-2016. We expect it to be able to take on additional 3rd party orders by mid 2014. Once in full operation, it will be able to deliver 4-5 larger vessels a year. Orders have returned… led by PSVs. The PSV market has experienced a rebound in orders in 2010, with 91 units

ordered globally, vs. 73 a year before. This has been led by the larger capacity PSVs (>3,000 DWT), which accounted for 57% of 2010’s orders. However, orders for AHTS have been slow, due to overbuilding over 2005-10. Orders to continue to make a comeback, underpinned by : 1) greater E&P spending as oil companies look to increase production in an high oil price environment; 2) asset replacement cycle as the highly aged global OSV fleet will have difficulty meeting the increasingly stringent safety and environmental standards and the tougher offshore drilling and production conditions; 3) deeper waters and harsher environments will require equipment able to deliver higher performance, with larger tonnage and cost efficient OSVs. Expecting order wins to pick up over 2H 2011 to 2013. We expect orders to pick up in FY11, with YTD order wins of c. NOK2.4bn vs. our full year order wins assumption of NOK13bn. Current orderbook is estimated to be NOK19.4bn (NOK16.3bn if exclude the 8 Transpetro carriers, awaiting funding approval), underpinning earnings visibility up to FY16. For FY12/13, we have assumed order wins of NOK12bn/NOK15bn. STX OSV to deliver steady FY10-12 EPS CAGR of 15%. Despite full yard utilisation till late 2012/early 2013, we expect STX OSV to post recurring earnings CAGR of 15% over FY10-12, vs. revenue CAGR of 8%. This will be largely driven by improved project execution and efficiency gains, resulting in superior EBITDA margins of >10% over FY11F-12F vs. FY07-10’s average of 4%. Initiate coverage with BUY; upside of 55%. At 7x FY11 PE, STX OSV is trading at an unwarranted discount to peers, with valuations supported by steady earnings growth and an attractive dividend yield of 4.2-4.5%. We initiate coverage on STX OSV with a BUY recommendation. Our TP of S$1.86 is based on 11x blended recurring FY11/12 PE, derived from the average historical forward PE among the large (13.3x) and small/mid cap (8.2x) Singapore listed yards. Potential catalysts, risks. We view potential near term catalysts from the approval of financing on the 8 Transpetro LPG carriers, which will make the contracts effective, as well as more OSV order wins. Risks include cost overruns, increased competition, and share overhang concerns on potential placement by parent company of up to a 19% stake in the company.

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SWOT Analysis

Strengths Weakness Focus on complex and highly customised OSVs. STX OSV focuses on the design and construction of complex and highly customised OSVs, requiring a high degree of technology and experienced workforce. This level of technological capability differentiates them from many yards that compete in the more saturated small/mid-sized run-of-the-mill type OSV market. One of few high-end OSV yards with in-house vessel design capabilities. STX OSV is one of the few high-end OSV shipbuilders with its own in-house vessel design and engineering capabilities. Orders are typically secured by invitation of customers than competitive bidding, ensuring a certain degree of pricing power for the group. Market leader for large PSVs and AHTS.STX OSV is currently the largest builder of AHTS of >20,000 BHP and PSVs of >4,500 DWT, with a global market share of 30.8% and 18.0% respectively. It also ranks highly for vessel designs, being 1st and 2nd in terms of market share for PSVs >4,500 DWT and AHTS >20,000 BHP being built based on its in-house designs. Strong track record; with many industry milestones. Delivered >200 offshore and specialized vessels since 2000, and has achieved several industry milestones (see appendix). Strategic location of yards. STX OSV currently has 9 strategically located yards in operation: 5 in Norway, 2 in Romania and 1 each in Brazil and Vietnam. This enables the group to maintain its competitive advantage in innovation, cost efficiency, manufacturing flexibility, while leveraging off its close proximity to key offshore oil and gas markets to tap on regional opportunities and expand its customer base.

Development of prototype vessels involves risk. Some customers require the group to build prototype vessels using latest design and technology and explore new concepts. However, such new designs may not perform as expected, and could encounter unexpected problems in design, engineering, production or after delivery phases. Back-end loaded payment terms implies heavy reliance on external sources to fund working capital. The payment terms STX OSV typically extends to its customers is back-end loaded, with 20% upfront and the remaining 80% upon delivery. This implies STX OSV’s access to ready financing is crucial to the business to fund working capital. This is met via construction loans from banks. As such, we believe a potential deterioration of the credit markets is a risk to the group’s access to funding as well as its customers’ ability to pay for the vessels. However, we note that through the recent global financial crisis, STX OSV did not experience issues on accessibility to funds or any customer defaults or cancellations. Compensation from third party design contracts may not adequately cover losses. STX OSV occasionally uses third party vessel designs. In the event of a delay in vessel delivery due to design flaws, the design purchase contract typically provides for compensation by way of liquidated damages. However, the contracts typically include a cap on the compensation amount, and the compensation available under the contracts may be less than the actual losses suffered by the group.

Opportunities Threats More investments into exploration and production. With oil prices and input costs at levels which make most projects economically viable, oil companies are also increasing focus on growing production. Industry consultants Energyfiles/ Douglas Westwood estimates that over the next 5 years, world offshore oil and gas production spending would amount to US$874bn. This willingness of oil companies to invest is demonstrated by higher E&P capex budgets in 2011. Asset replacement cycle on highly aged OSV fleet. The global AHTS and PSV fleets are highly aged, averaging 16.9 years and 17.5 years respectively. This implies an increasing technical demand/supply mismatch, and will face increasing difficulties in meeting the increasingly stringent safety and environmental standards, as well as the tougher offshore drilling and production conditions. Assuming vessels >30 years are removed from the market, we estimate that replacement demand to be 496 for AHTS and 479 for PSVs, or around 23% of the existing global fleet. Deeper waters, harsher environment E&P activities to drive demand for high spec OSVs. As offshore activities move into deeper waters and harsher environments, the installations have also become more sophisticated. This has resulted in an evolution in OSV design with a greater emphasis on research and development, equipment able to deliver higher performance, and OSVs with larger tonnage and cost effectiveness.

Competition from yards in lower cost countries. There have been many new entrants to the OSV shipbuilding industry in recent years, especially from more cost efficient countries such as Korea and China. This could result in an increased competition for a limited number of new orders, adversely impacting pricing power, or significantly push down prices for newbuilds. Overly high oil prices may do more harm than good. Global offshore oil and gas capex is generally positively correlated with oil prices. This positive correlation is also observed with respect to the Singapore-listed yards’ annual order intake and oil prices since 2004. A caveat to note, however, is a too sharp and sustained spike in oil prices beyond US$100/bbl can cause unwanted inflationary pressures, posing significant threat to the economy. Risk of cost overruns on fixed price contracts is higher in a rising cost environment. Most of STX OSV’s shipbuilding projects are fixed price contracts, except for a few that include price adjustment provisions in the event of steel price increases. STX OSV typically negotiates the price of major equipment and supplies, and will factor in all such costs into the contract price on contract signing. Labour and funding costs are two major cost drivers that are not hedged, and are priced into the contract based on best estimates for inflation.

Source: DBS Vickers

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Company Background Leading builder of complex and customised OSVs. STX OSV is one of the major global shipbuilders specialising in the construction of complex and highly customised offshore support vessels (OSVs) such as anchor handling tug supply (AHTS) vessels, platform supply vessels (PSV), advanced offshore subsea construction vessels (OSCV), as well as other specialized vessels. The Offshore & Specialised Vessels division of STX Europe. Headquartered in Alesund, Norway, STX OSV has close to 9,000 employees worldwide and currently operates 9 shipyards in Norway, Romania, Brazil and Vietnam. Listed on the Singapore Exchange on 12 November 2010, it is a spin-off from Norway-based STX Europe (formerly Aker Yards), and houses the latter’s Offshore & Specialized Vessels division. The STX Europe group (formerly Aker Yards) has a rich heritage in shipbuilding, having been in the business of designing and building vessels for >50 years. Strong parentage. STX Europe, the parent of STX OSV with a 69.02% equity stake, is the largest shipbuilding group in Europe and one of the world's four largest shipbuilders. Its operations are divided into 3 business segments: Cruise & Ferries, Offshore & Specialized Vessels, and Other Operations. It has a total of 15 operating shipyards spread across Brazil, Finland, France, Norway, Romania and Vietnam. STX Europe is in turn owned by Korea-based STX Group, ranked 12th largest business group by total assets as of April 2010 by the Korea Fair Trade Commission. Its businesses include Shipbuilding & Machinery, Shipping & Trading (dry bulk shipping, bunkering, resource trading), Energy (operates cogeneration and solar power plants, develops renewable energy and resources), and Plant & Construction (civil engineering, plant maintenance and construction of industrial plants and housing). Shipbuilding is the mainstay, complemented by sales of design and equipment packages. STX OSV derives revenue mainly from the design and construction of complex and highly customized OSVs and other specialized vessels like LNG-powered ferries, naval and coast guard vessels, fishing vessels and non-offshore related icebreakers with customer-specific applications. This accounted for 92-97% of total revenue over FY07-09. Complementing its service offerings are its in-house design and engineering capabilities and development of electrical engineering, power and automation solutions. STX OSV is able to provide basic in-house developed designs to other yards and ship owners once the prototypes have been built

in-house and the design has gained references and maturity in the market. Such designs are typically sold as bundled packages with related main equipment and electrical solutions, allowing it to derive a small but growing proportion of revenue, booked under Trading revenue. This accounted for 1% of sales in FY07 and up to 3% in FY09. Note that from FY10 onwards, STX OSV does not disclose revenue breakdown. Key corporate events

Date Event

Mid 1990's

• STX Europe's predecessor, Aker Yards, developed into a major builder of passenger, merchant, and specialised vessels.

2000 - 2003

• Aker Yards acquired the Tulcea and Braila yards in Romania, the Niteroi yard in Brazil, and the Brevik yard in Norway. By 2003, Aker Yards owned shipyards in Germany, Finland and Norway.

2004 • Aker Yards listed on the Oslo Stock Exchange.

2007 • In March 2007, Aker divested its entire ownership interest of

40.1% in Aker Yards. • Aker Yards commenced construction of a shipyard in Vietnam

in April 2007; secured newbuild contracts for 6 AHTS vessels within the year.

• In October 2007, STX Group acquired a 39.2% stake in Aker Yards ASA.

2008 • Aker Yards renamed to STX Europe in September 2008 to

reflect change in ownership structure. • STX Europe streamlined its Cruise & Ferries and Offshore &

Specialised Vessels division; discontinued Merchant Vessels as a business area with the divestment of two yards in Germany and one in Ukraine.

2009 • In early 2009, STX Group acquired the remaining shares in STX Europe and became its sole shareholder; STX Europe became a wholly owned subsidiary of the STX Group.

• In February 2009, STX Europe delisted from Oslo Stock Exchange.

• Restructuring undertaken to streamline and rationalise the group structure.

2010 • STX OSV, the Offshore & Specialised Vessels business of STX

Europe, was listed on the Singapore Exchange on 12 Nov 2010.

2011 • On 1 April, STX OSV announced grant of an environmental

licence for the construction of a second Brazilian yard in the state of Pernambuco, paving the way for development work to progress without delay.

Source: STX OSV, STX Europe, DBS Vickers

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Revenue breakdown

*NB: From FY10 onwards, STX OSV does not disclose revenue breakdown in this format. Source: STX OSV, DBS Vickers Key customers by % of total revenue

Major Customers 2007 2008 2009 1H10

DOF 19% 27% 38% 30%

Farstad Shipping 13% 17% 12% 2%

AP Moller-Maersk 7% 19% 4% 0%

Island Offshore 14% 5% 2% 1%

Solstad Offshore 0% 1% 6% 14%

Nordcapital 3% 8% 4% 2%

"K" Line Offshore 0% 1% 5% 15%

Petroleum Geo-Services 5% 4% 2% 0%

Aker Oilfield Services 0% 1% 4% 8%

Rem Offshore 1% 0% 3% 6%

% of total revenue 62% 83% 82% 77%

NB: The table above only lists customers which accounted for at least 5% of total revenue in any period from 2007 to June 2010. Other notable customers (past and/or current) of STX OSV include Aker Solutions, Olympic Shipping, Siem Offshore, Deep Sea Supply, Simon Møkster Rederi, Gulf Offshore and Tidewater. Source: STX OSV, DBS Vickers Customers are mainly vessel operators. STX OSV’s customers are primarily vessel operators which provide logistics support and offshore construction and field operation services to companies operating globally in the oil and gas industry. Asset speculators do not feature as key customers given that STX OSV typically builds highly specialised/customised vessels. Established customer relationships and track record ensures recurring business. We note that STX OSV also secures a high level of recurring orders from its customers, with its repeat customers ordering more than 140 vessels since 2000 (i.e. an average >12.7 vessels/year). It has a long, established relationship with its two largest customers, DOF and Farstad, stretching over 20 years; STX has delivered 26 and 17 vessels

to these 2 respective customers since 2000, with another 8 and 4 vessels on order. We believe its ability to secure repeat orders from industry leaders is due to its timely delivery, high level of technical expertise, and ability to customise vessels to their needs Growing proportion of revenue from non European-based customers. While historically most of its customers are Europe-based (Norway and EU), forming 80-89% of revenue over FY07-09, STX OSV has made in-roads into other markets, particularly with South American customers with its local presence in Brazil, which made up 16% of revenues in FY09, up from 8% in FY07. Closest competitors predominantly European. While to a limited extent, certain other STX Group companies are also engaged in the construction of certain OSVs and specialized vessels, these are generally not as complex as those built by STX OSV. In terms of external competition, STX OSV’s main competitors within its market segment still predominantly are other Norwegian and European shipyards that focus on developing own design concepts and innovations. These include Ulstein Group ASA, Kleven Maritime AS, Havyard Group AS and Bergen Group ASA from Norway; IHC Merwede B.V. in the Netherlands for certain specialized vessels. % of revenue by customer location

Source: STX OSV, DBS Vickers

0

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STX OSV corporate structure

* NB: 100% voting rights

Source: STX OSV, DBS Vickers

STX OSV AS (Norway)

STX OSV Braila SA (Romania)

STX OSV Tulcea SA (Romania)

STX OSV Vung Tau Ltd.

(Vietnam)

STX OSV RO Holding SRL (Romania)

STX OSV Niteroi SA

(Brazil)

Estaleiro Promar SA

(Brazil)

STX OSV Singapore Pte Ltd.

(Singapore)

STX OSV Design AS (Norway)

ST OSV Electro AS (Norway)

STX OSV Piping AS (Norway)

STX OSV Accommodation AS

(Norway)

STX OSV Brevik Holding AS (Norway)

100% 51% * 50.5% 100% 100% 100% 100% 100% 100%

STX Corporation Co. Ltd.

STX Offshore & Shipbuilding Co. Ltd STX Engine Co. Ltd

STX Norway AS

STX Europe AS

STX Europe Holding AS Free float

STX OSV Holdings Limited (Singapore)

33.7% 33.6%

66.7% 33.3%

100%

100%

100%

69.0% 31.0%

100%

5.88% 94.12% 95.43% 100%

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Leading builder of complex and highly customised OSVs STX OSV’s vessels used in multiple phases over the offshore field lifecycle. The OSVs built by STX OSV (hereafter also referred to as “the group”) are used across the oil services industry, particularly in offshore oil and gas exploration and production to perform various functions, such as anchor-handling, towing of rigs/floating production units, supply runs, offshore construction, pipelaying and eventual decommissioning. Focus on complex, advanced vessels. Within the OSV market, STX OSV focuses on the construction of more complex, advanced offshore and specialized vessels, such as AHTS of >20,000 BHP (brake horse power) and large PSVs of >4,500 DWT (deadweight tons). These categories of vessels are required for harsh offshore environments and deepwater deployment. The construction of such high-end and customised OSVs requires a high degree of technology and an experienced workforce capable of operating in a flexible manner. One of few high-end OSV yards with in-house vessel design capabilities. STX OSV Design AS, a wholly-owned subsidiary of STX OSV, provides in-house expertise in both the design and construction phases of a newbuild project. This subsidiary was started in 2000, and sold its first design around 2002. It delivered 2 vessels in 2004 based on its first commercialised design, AH03. Today, STX OSV is one of leaders in constructing and introducing highly advanced prototype vessels in the OSV segment to the market, and is one of the few high-end OSV shipbuilders with its own in-house vessel design and engineering capabilities. Orders typically secured by invitation of customers. STX OSV’s in-house design and engineering capabilities enables it to 1) help customers come up with innovative design solutions for new vessel prototypes, 2) tailor vessel specifications or make adjustments to existing designs to meet its clients’ varying demands efficiently, 3) incorporate advanced technology into actual production quickly, and 4) develop, coordinate and improve the engineering and production at individual yards

more effectively, reducing manufacturing time and errors. As such, the group typically secures vessel orders through an invitation of the customer rather than through competitive bidding. STX OSV has achieved industry “firsts”. With a robust in-house vessel design and engineering capabilities, STX OSV has achieved several significant industry milestones. A few examples include the first vessel (Island Frontier) built to the class notation “well intervention”, designed for operations previously performed by drilling units; the first AHTS (Normand Prosper) with a 24m wide extreme beam for significantly improved stability in harsh environments; and the first LNG-powered PSV (under construction; to be named) with the LNG storage located outside the cargo area, freeing up more cargo capacity for commercial operations. Ability to develop new products. This includes the conceptual development of a large-scale oil recovery and standby vessel designed to manage oil spill incidents. The group currently has a patent application pending on this vessel design. It also boasts an ability to develop and market its own vessel designs and electrical solutions such as automation and power management systems. High degree of technology is the key competitive advantage vis-à-vis Asian competitors. While yards in countries such as Korea and China are more cost competitive and generate high production volumes, these apply mainly to more standardized vessels in the traditional commercial shipbuilding segment such as dry bulk carriers, tankers and containerships. However, a growing number of Asian yards have been progressing up the value chain over the recent years, building increasingly complex and specialised vessels. As such, we view STX OSV’s high degree of technology and its ability to design, build and customise highly complex vessels as a key competitive advantage vis-à-vis its Asian competitors.

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STX OSV Holdings Limited

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Description of the main types of OSVs built by STX OSV

OSV category Purpose / Description

Anchor handling tug supply vessel (AHTS)

• A dual purpose tug designed for anchor-handling and towage of offshore drilling units/ construction vessels/ floating production units, as well as to perform offshore supply duties.

• Fitted with special equipment on deck for moving anchors including a large winch. • The main parameter of such a vessel is the propulsion power, measured in brake horsepower (BHP) or bollard pull (BP). AHTS engine

power typically ranges from 4,000 - 35,000 BHP; AHTS with >14,000 BHP are suitable for deepwater anchor handling duties. • AHTS vessels can also perform supply functions as they are generally equipped with a sizeable free deck area and under deck tanks

specially designed for transporting liquid cargo and dry bulk.

Platform supply vessels (PSV)

• Specially designed to transport liquid and dry cargo to and from offshore installations, drilling rigs and construction vessels. • Have specially designed tanks under deck for transporting fuel, fresh water, drilling mud, cement and brine. • Does not have anchor-handling equipment on the deck – results in a larger free deck area, for transport of containers, pipes and

other cargo, which is the main technical parameter for a PSV. • Larger and more modern PSVs are considered to have at least 900sqm of free deck area. Medium PSVs have between 500 - 900sqm

of free deck area.

Offshore subsea construction vessels (OSCV)

• OSCVs serve as floating bases for carrying out various types of offshore construction work necessary for offshore oil and gas production.

• Such vessels are used for installation of offshore infrastructure such as platforms and pipelines; also involved in the later stage of the oil and gas fields’ life cycle for maintaining, upgrading and decommissioning the infrastructure.

• Generally multipurpose vessels that can mobilize gear appropriate for a particular job. As such, they can vary greatly and often have significant modular equipment installed for a particular task.

• Typically, OSCVs are equipped with large cranes, large accommodation capacity, and have different types of specialized construction gear on board for performing construction work. Some of these are permanently installed while some are modular so that it can be tailored to the specific operational requirements.

• Some of the key equipment include saturation diving spread and remotely operated vehicles (ROVs) for diving operations; some are equipped with pipelaying equipment to install pipes of different diameters and in different water depths.

• Modern OSCVs are built with DP in order to optimize efficiency of construction activities and facilitate operations in deeper water.

Other vessels • STX OSV builds naval and coast guard vessels, seismic vessels, fishing vessels, icebreakers for non-offshore oil & gas markets, and LNG-powered car and passenger ferries for Norwegian ferry operators.

Source: RS Platou, STX OSV, DBS Vickers STX OSV designs and builds vessels used in the various phases of the offshore field lifecycle Source: RS Platou, STX OSV

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>200 vessels delivered since 2000; market leader in large AHTS/PSVs. It has delivered >200 offshore and specialized vessels since 2000 and is currently the largest builder of AHTS of >20,000 BHP and PSVs of >4,500 DWT, with a global market share of 30.8% and 18.0% respectively, based on orderbook as of end August 2010 according to RS Platou. It ranks second in the OSCV segment (i.e. saturation diving support vessels, pipe-laying support vessels and remotely operated vehicle support vessels) with a 6.6% market share. In-house generated vessel designs gaining traction in the market. STX OSV’s in-house developed vessel designs are achieving a high level of market acceptance by its customers. Indeed, as of May 2011, out of the 49 vessels in the group’s orderbook, 37 are based on STX OSV’s own design. Based on data from RS Platou, 28.1% of PSVs of >4,500 DWT and 30.8% AHTS of >20,000 BHP in the global orderbook (as of end August 2010) are based on STX OSV’s designs. This represents a dramatic increase from only 5.6% and 12.7% respectively of such vessels delivered since 2000.

Vessels delivered / to be delivered by STX OSV: a significant pickup in the proportion of vessels based on its own designs

NB: This excludes the orders for 8 LPG carriers for Transpetro, to be

delivered over 2014-16.

Source: STX OSV, DBS Vickers Newbuilds: STX OSV commands a leading market share in the AHTS (>20,000 BHP) and PSVs (>4,500 DWT) markets

NB: Market share is based on the global orderbook as of 31 August 2010.

OSCV here refers in particular to saturation diving support vessels, pipe-laying support vessels and remote operated vehicle support vessels.

Source: RS Platou, STX OSV, DBS Vickers

PSV (>4,500 DWT)

0%

5%

10%

15%

20%

STX

OSV

Fujia

nM

awei

East

ern

Ship

build

ing

Nor

thA

mer

ican

Kle

ven

Mar

itim

e

Coc

hin

Sino

-Pac

ific

Thom

a-Se

a

Uni

vers

alSh

ipbu

ildin

g

OSCV

0%

2%

4%

6%

8%

10%

AB

G

STX

OSV

Dal

ian

Ship

bu

ildin

g

Ber

gen

Co

lom

bo

Dry

do

cks

Wo

rld

AHTS (>20,000 BHP)

0%

10%

20%

30%

40%

STX

OSV

Dal

ian

Ship

bu

ildin

g

Klev

enM

arit

ime

PT B

atam

ec

Dry

dock

sW

orld

Wuc

han

gSh

ipb

uild

ing

Hav

yard

0

5

10

15

20

25

2004 2005 2006 2007 2008 2009 2010 2011F 2012F 2013FN

o.

of

vess

els

STX OSV design Non STX OSV design

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STX OSV Holdings Limited

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In-house vessel designs gaining traction: STX OSV has leapfrogged other leading vessel designers with an increased market share (PSVs of >4,500 DWT and AHTS of >20,000 BHP) based on its in-house generated designs

Source: RS Platou, STX OSV, DBS Vickers

AHTS (>20,000 BHP)0% 10% 20% 30% 40% 50%

Wartsila (F inland)

STX OSV (Norway)

Rolls-Royce (UK)

Havyard (Norway)

Current orderbook (as of end Aug 2010)Vessels built after 2000 (as of 30 June 2010)

PSVs (>4,500 DWT)0% 10% 20% 30%

STX OSV (Norway)

MMC (Poland)

Ulstein (Norway)

Wartsila (Finland)

Tiger Shark (USA)

Current orderbook (as of end Aug 2010)Vessels built after 2000 (as of 30 June 2010)

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STX OSV Holdings Limited

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Network of yards strategically located within key and growing oil and gas markets Leveraging off North Sea exposure. STX OSV is headquartered in Norway, which is home to a distinct cluster of leading companies involved in the offshore marine design, equipment manufacturing, shipbuilding and ship operation industries. By leveraging off its significant know-how and experience gained from its proximity to the North Sea, characterised by the harsh operating environment offshore and stringent regulatory safety and environmental standards imposed by governments across Northern Europe, STX OSV is able to provide some of the most advanced solutions and services to its customers worldwide. Strategic location of yards. STX OSV currently has 9 yards in operation - 5 of them are in Norway, 2 in Romania and 1 each in Brazil and Vietnam. Its network of yards is strategically located around the world, enabling the group to maintain its competitive advantage in innovation, cost efficiency, manufacturing flexibility, while leveraging off its close proximity to key offshore oil and gas markets to tap on regional opportunities and expand its customer base. Network of yards can deliver 23-25 vessels/year. STX OSV typically takes 18 to 24 months to construct and deliver a vessel to its customers, based on its existing yard capacity. Depending on the mix of vessel types and vessel sizes in the orderbook, the group is able to deliver between 23 and 25 OSVs a year; it delivered an average of 23 vessels per year over 2007-2010. Norway-Romania value chain leverages on Norway’s high technical capabilities and Romania’s lower cost structure. STX OSV undertakes higher value and technically complex outfitting works on completed vessel hulls at its yards in Norway, where it has access to a pool of highly skilled engineers and designers. Many of these yards have been in operation for >60 years, with significant accumulated experience in the construction of various types of specialised vessels for customers across the world. To enhance its cost

competitiveness, the less sophisticated and labour intensive fabrication of vessel hulls is conducted at the group’s yards in Romania, a lower cost country. The group intends to gradually develop its Romanian yards to be capable of completing a larger proportion of the entire vessel construction, vs. limited to hull production. Vietnam and Brazil yards are able to build complete vessels. The group can also build entire vessels in one location – in Brazil or Vietnam. STX OSV was one of the first foreign OSV builders in Brazil, commencing shipbuilding operations in the country in 2001. Along with its consistent track record, it has been able to capture a significant 45% market share (based on % of vessels under construction, according to RS Platou data) in the country where locally built OSVs with higher local content are favoured over foreign-built vessels. The yard in Vung Tau, Vietnam, began operations in April 2008. It delivered its first vessel 24 months later in May 2010. To date, it has successfully delivered 3 vessels (12-16k BHP AHTS), with 5 more in the orderbook. Expansion plans to coincide with actual requirements. As the group’s existing yards impose limitations on the maximum vessel size and number of vessels that can be built a year, there are plans to expand facilities to increase capacity as well as to accommodate larger construction projects. For example, the group is looking to expand the launch facility in the Tulcea yard in Romania, allowing projects with a wider breadth to be undertaken. We understand that the group will only kick start this initiative once there is a project in place which demands such infrastructure support. Potential expansion of capacity or capability via acquisitions or partnerships. STX OSV may consider strategic acquisitions or partnerships to expand production capacity and design and engineering capabilities. It also continuously evaluates potential acquisitions of engineering firms with expertise in specialised technologies.

STX OSV’s shipbuilding value chain

Source: STX OSV

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Details of yard facilities

Yard / (Country) Type

Size (sqm)

Dock (m) / Crane (ton)

Steel processing capability (tons/year)

No. of Hulls / year

Hulls for outfitting / year Employees Stake Status

Aukra (Norway)

Outfitting yard

5,000 Outfitting quay: 240m / 75/60/8

NA NA 4 120 100% Operating

Brattvaag (Norway)

Outfitting yard

4,580 Outfitting quay: 205x10-20m / 50x3/18m

NA NA 4 143 100% Operating

Brevik (Norway)

Outfitting yard

4,580 Outfitting quay: 30/100/50m / 20/12/12/8

NA NA 5 137 100% Operating

Langsten (Norway)

Outfitting yard

31,800 Floating dock: 6000 tons / 100x2

NA NA 6 200 100% Operating

Soviknes (Norway)

Outfitting yard

44,000 Outfitting quay: 250m; Slipway: 4,500 tons / 60/30/18

NA NA 5 160 100% Operating

Braila (Romania)

Hull production

500,000 Slipway: Maximum launching 3200 tons, maximum docking capacity 2800 tons; Outfitting quay: 1300m / 50

40,000 10 2 1,944 100% Operating

Tulcea (Romania)

Hull production

750,000 Syncrolift: 6500 tons; Outfitting quay: 1500m / 15/50

60,000 16 0 2,780 95% Operating

Vung Tau (Vietnam)

Hull production & outfitting yard

- Floating dock: 31x80m / 60x2 + 10x4

7,000 to 10,000

3 to 4 3 to 4 650 100%* Operating

Niteroi (Brazil)

Hull production & outfitting yard

110,000 Outfitting quay: 210m / 50x3 + 10x5

6,000 to 8,000

2 to 3 2 to 3 1,453 51% Operating

Pernambuco (Brazil)

Hull production & outfitting yard

800,000 Quay length: 300m

20,000 4 to 5 4 to 5 Under development (construction expected to commence within 2Q2011; operations to commence in 2012; full operations by 2013)

NB: * In December 2010, STX OSV acquired the 30% stake in the Vung Tau yard it did not already own from Amanda Shipyards Pte Ltd for c. S$6.6m, giving it full control of the yard. ^ Total capex for the Pernambuco yard is c. US$100m over a period of 3 years; 75% of this to be debt funded by the Brazilian Merchant Marine Fund. The remaining 25% will be equity funded: 50.5% by STX OSV, with the remaining 49.5% to be funded by JV partner, PJMR Empreendimentos Ltda.

Source: STX OSV, DBS Vickers

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Leveraging off dominant presence in Brazil with second yard Prorefam: Brazil’s ambitious fleet renewal plan. In 2008, Petrobras together with the Brazilian government launched the fleet renewal programme known as “Prorefam”, which seeks the construction of 146 supply vessels, divided into 7 blocks, over 2008 to 2014. As per Brazilian law, these vessels have a strict local content requirement, which stipulates that 70-80% of the vessel must be built locally, depending on vessel type. These vessels will be used to support new and existing projects, in particular, Brazil’s ambitious plans to develop its massive pre-salt oil reserves, as well as to replace an aged Brazilian fleet – out of the current fleet of 240 supply vessels in Brazil, only 30% are Brazilian flagged, averaging 20 years old. The Petrobras Prorefam fleet renewal programme

Vessel model Quantity

AHTS 21,000 HP 8

18,000 HP 46 15,000 HP 10

PSV 4,500 tons 49 3,000 tons 15

Oil Recovery Supply Vessel (ORSV)

18

Total 146

Source: Transpetro Delivery plan of critical resources under Petrobras’ 2010-2014 business plan

Delivery plan (accumulated value)

Critical resources

Situation as of Dec

2009 By 2013 By 2015 By 2020 Drilling rigs water depth >2000m

5 26 31 53

Supply and Special Vessel

254 465 491 504

Production platforms (semisubs and FPSO)

41 53 63 84

Others (Jacket and TLWP)

79 81 83 85

Source: Petrobras Orders to be awarded under third round of tender. To date, under the first 2 phases of the programme, a total of 38

vessels (28 PSVs, 4 AHTS, and 6 ORSVs) have been contracted, implying an outstanding balance of 108 vessels required. According to industry publication Upstream, Petrobras would have received tenders for the third round of contracting under Prorefam in April 2011, with 20-24 orders up for grabs. Indeed, Petrobras was reported to be already considering the possibility of contracting more vessels in the future to cope with the massive pre-salt demands. New yard in Pernambuco will reinforce leading market share. In anticipation of the robust local demand for such vessels, STX OSV is developing a second shipyard in the municipality of Ipojuca, in the Brazilian state of Pernambuco. This second yard is expected to reinforce the group’s leading position in Brazil, with a commanding market share of 45%, based on vessels under construction as of June 2010 according to RS Platou. Brazilian capacity to increase to 6-8 vessel deliveries per year. Once in full operation, it will be able to deliver 4-5 larger vessels, on top of the existing Niteroi yard’s capacity of 2-3 vessels per year, bringing the group’s total Brazilian capacity to 6-8 vessels/year. The new yard will feature a more modern and streamlined layout and production facilities, with a significantly higher production capacity of 20,000 tons hull weight per year, vs. the group’s existing Niteroi yard of 8,000 tons/year. This new yard will enable STX OSV to build more and larger/more complex vessels to service the growing Brazilian market. New yard to commence building the first vessel in 2012; financing approval on Transpetro’s 8 LPG carriers a likely catalyst. The yard will kick off partial operations in mid 2012, commencing with the construction of the first of a series of 8 LPG carriers for Petrobras Transporte S.A., or Transpetro, secured in 2010. These contracts, however, will only become effective once financing approval is given by Brazil’s Merchant Marine Fund. Total contract value is approximately US$536.3m (NOK3.1bn), with delivery expected between 2014-2016. Yard development work has commenced. In April 2011, the group secured the environmental licence required for the construction on the yard, paving the way for development work to progress without delay. Construction of the yard will begin in 2Q2011, with the yard to be in full operation in 2013. We only expect the group to be able to take on other third party orders from mid 2014, considering the capacity tied up on the 8 LPG carriers.

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STX OSV Holdings Limited

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STX OSV is well positioned to benefit from several industry trends Resumption of offshore E&P spending Oil demand growth underpinned by global economic growth. Given the close correlation between GDP and energy consumption, oil demand in 2011 will continue to be driven on the back of improving world economies. Against this backdrop, Douglas-Westwood warns of a possible oil supply crunch. It notes that oil demand growth in previous economic recoveries (i.e. 1976-1978 and 2002-2004 periods) averaged between 7.3mb/d and 7.7mb/d. If we were to apply similar growth patterns on today’s demand, this could lead to a possible oil supply crunch in 2012-13, based on current supply projections. More investments into exploration and production (E&P) are required to meet projected demand growth and avoid a potential supply crunch. With oil prices and input costs at levels which make most projects economically viable, oil companies are also increasing focus on growing production. Industry consultants Energyfiles/ Douglas Westwood estimates that over the next 5 years, world offshore oil and gas production spending would amount to US$874bn, with growth to pick up more significantly from 2011 onwards. Growth resumes in oil companies’ offshore capex spending. We believe willingness of oil companies to invest, as demonstrated by higher E&P capex budgets in 2011, bodes well for the overall offshore and marine sector. For instance, we note that Chevron’s 2011 capital and exploratory budget has been set at US$26bn, +20% y-o-y from 2010’s US$21.6bn; Shell has earmarked US$25-27bn for capital investment, vs. 2010’s US$24bn, while ExxonMobil has guided for a capital and exploration expenditure budget of around US$33-37bn annually for the next several years, up from 2010’s record of US$32.3bn. Closer to home, Malaysia’s national oil company, Petronas, has been reported to be looking to spend RM275bn (US$90.6bn) over the next 5 years; this equates to an annual spend of around RM50-55bn, up from RM40bn in the current fiscal year. CEO Shamsul Azhar has guided for higher capex as aging assets need to be replaced.

Oil demand under three scenarios vs. global liquids production capacity

Source: IEA, Douglas-Westwood Global offshore oil and gas production spend (capex and opex, in US$bn)

Source: Energyfiles, Douglas-Westwood

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STX OSV Holdings Limited

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Asset replacement cycle Global AHTS / PSV fleets are highly aged, represents large replacement potential. The global AHTS and PSV fleets are highly aged, averaging 16.9 years and 17.5 years respectively. Excluding vessels delivered over the last building boom from 2005, the average age of the global fleet would be even higher at 26.7 and 23.8 years respectively. This implies that many vessels were built based on technological and safety standards more than 20 years ago, implying an increasing technical demand/supply mismatch, and will face increasing difficulties in meeting the more stringent safety and environmental standards, as well as the tougher offshore drilling and production conditions. Assuming vessels >30 years are removed from the market, we estimate that replacement demand to be 496 for AHTS and

479 for PSVs, or around 23% of the existing global fleet. This number will be significantly higher if we were to include vessels >25 years old. Enhanced safety requirements for offshore drilling. The Macondo disaster in the US Gulf of Mexico in April 2010 led the US government to impose a 6-month moratorium on certain drilling activities in the GOM from 30 May 2010. The moratorium was eventually lifted only upon the adoption of stricter and enhanced regulations. Increased focus on safety spurring new orders. Following the Macondo disaster, industry players have noted a flight to quality, with oil and gas companies increasing emphasis on quality and capability of equipment, and favouring contractors with established operational experience and track record.

Annual deliveries of AHTS Source: Clarksons, DBS Vickers Annual deliveries of PSVs Source: Clarksons, DBS Vickers

0

50

100

150

200

250

1963

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

No

. o

f d

eliv

erie

s

<4,000 BHP 4,000 - 7,999 BHP 8,000 - 12,000 BHP >12,000 BHP

Avg age of exis ting AHTS fleet = 16.9 yearsAvg age of AHTS delivered pre-2005 = 26.7 years

0

50

100

150

200

250

300

350

400

450

500

<=

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

No

. o

f d

eli

veri

es

PSV <3,000 DWT PSV >3,000 DWT

Avg age of exis ting PSV fleet = 17.5 yearsAvg age of PSVs delivered pre-2005 = 23.8 years

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Younger vessels post better utilisation rates; newer tonnage preferred. While the enhanced safety requirements do not explicitly cover OSVs, data from ODS Petrodata reveals a growing divergence in utilisation rates between younger and older vessels, similar to what has been observed in the rig market (refer to our 10 March 2011 Offshore & Marine report “Offshore on the radar”). Indeed, the average age of the growing fleet of idled AHTS and PSVs stands at 21.7 and 25.0 years respectively. Of which, 66% and 71% of idled AHTS and PSVs are 20 years or older. Since 1Q 2010, utilisation rates of vessels built after 2004 (i.e. up to 6 years old) have remained within 70-75%, despite the significant number of deliveries across 2010, which saw 184 AHTS and 80 PSVs forming 8.7% and 4.4% of the existing fleet. In contrast, utilisation rates for vessels built before 1992 (i.e. >20 years old) have continued to trend downwards, approaching 50% as of 1Q2011. We believe the addition of newbuilds to an already saturated market enable end users to choose from a wider pool of available assets, favouring younger, more reliable tonnage and resulting in the idling of old tonnage (i.e. 20 years and older). Fleet modernisation already underway in the rig market; OSV market next? To comply with the stricter safety and HSE regulations as well as increased customer requirements for younger assets, we have already seen many international drillers pushing to modernise their aged rig fleets, as evidenced by the surge of rig orders over the last 6 months. We believe this may eventually occur within the offshore support market, which typically lags by 6-12 months. Modern vessels can offer operating efficiencies, enhanced safety features. Indeed, older assets could present a greater possibility for equipment failure and compromise safety during operations offshore. Younger vessels, on the other hand, are less prone to technical issues which can lead to costly vessel downtime and high maintenance and repair

costs. This translates into high efficiency and utilisation rates for both the vessel owner and charterer. Modern vessels will also be equipped with enhanced features that would allow it to meet today’s stricter HSE standards. Growing divergence in utilisation rates between younger vs. older vessels Source: ODS Petrodata Increasing number of idled vessels Source: ODS Petrodata

Age profile of idled vessels Source: ODS Petrodata, DBS Vickers

0-19 years34%

>= 30 years31%

20-29 years35%

A HT S - av erage age of idle v essels: 21.7 y ears

0-19 years29%>= 30

years40%

20-29 years31%

PSV s - av erage age of idle v essels: 25.0 y ears

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STX OSV Holdings Limited

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As E&P activities move into deeper waters and harsher environments, demand for advanced, high spec OSVs to increase in tandem

Deeper waters / harsh environment hold the key to future oil supply. Offshore oil and gas discoveries across all water depths have been declining steadily, with deepwater discoveries comprising a growing proportion, from around 30% in 1999 to almost 40% in 2009.

Industry consultants project robust deepwater capex over the next 5 years. The lack of new opportunities in shallow waters and the need to offset the decline from existing reservoirs are driving deepwater investment at a much higher rate than in previous years. According to industry consultants Douglas-Westwood, deepwater expenditure is projected to record 79% growth in capex over 2011-2015 to US$206bn, from that recorded in the past 5 years.

The robust outlook for deepwater activity has led many international drillers to place orders for deepwater drilling rigs, with a total of 29 floaters (3 semisubmersibles, 26 drillships) ordered globally since October 2010 to end April 2011. The market for floating production and storage systems is also on the rise with the International Maritime Associates observing a growing number of floating production or storage systems being planned or under study, with 196 units as of November 2010 vs. 178 in July. Global discovery water depths (1999-2009); deepwater discoveries growing as a proportion of discoveries

Source: ODS Petrodata Global deepwater capex to recover from 2010

Source: Douglas-Westwood

This trend favour younger, more advanced and higher specification vessels. As offshore activities move into deeper waters and harsher environments, the installations have also become more sophisticated. This has resulting in an evolution in OSV design with a greater emphasis on research and development, equipment able to deliver higher performance, and OSVs with larger tonnage and cost effectiveness. Indeed, based on data from ODS Petrodata, while orders for new AHTS and PSVs have both declined, we note that recent new orders are primarily those of higher BHP AHTS or larger DWT PSVs. Some of these large BHP AHTS and PSVs are aimed at the offshore construction market, with added functionality such as large subsea cranes, increased accommodation capacity and moonpools. Size profile (in BHP) of AHTS delivered/to be delivered since 2001 Source: ODS Petrodata Size profile (in DWT) of PSVs delivered/to be delivered since 2001 Source: ODS Petrodata, DBS Vickers

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STX OSV Holdings Limited

Page 19

PSVs leading the rebound in OSV orders Orders for PSVs have recovered. The PSV market has experienced a rebound in orders in 2010, with 91 units ordered globally, vs. 73 a year before. This has been led mainly by the larger capacity PSVs (>3,000 DWT), which accounted for 57% of 2010’s orders. AHTS orders still slow, due to overbuilding over 2005-10. The AHTS market, however, has remained subdued, with annual orders continuing on a downward trend since 2007’s peak of 313 orders to 2010’s 65. Indeed, we believe this is due to overbuilding in this segment since 2005, which has seen 769 AHTS delivered since, vs. 486 PSVs. This saw AHTS to rig ratio jump from 2.3x in 2004 to 2.9x currently, led mainly by the <8,000 BHP AHTS category; PSVs saw this ratio increase slightly from 2.2x to 2.5x over the same period. Utilisation rate of AHTS currently below PSVs. As such, it is not surprising that the utilisation rate in the global AHTS market continues to decline, at c. 68% as of end 2010, according to ODS Petrodata. For PSVs, the decline in global utilisation rates seems to have bottomed at around 72% at end 2010, likely due to a healthier demand/supply balance. Day rates for PSVs and larger AHTS have generally improved from recent troughs. The demand/supply scenario is also reflected in vessel day rates, with all classes of PSVs now fetching higher day rates vs. the recent trough. While this is not the case across the AHTS market with day rates for the <10,000 BHP category still languishing near the bottom, we note, however, that the larger vessels (i.e. >10,000 BHP) are commanding improved day rates. Annual AHTS orders have yet to recover… Source: Clarksons, DBS Vickers

…while PSV orders have recovered from 2009’s level Source: Clarksons, DBS Vickers AHTS utilisation rate continues on downtrend Source: ODS Petrodata, DBS Vickers Day rates for global PSV term fixtures

Source: ODS Petrodata, DBS Vickers

Globa l AHTS a nd PSV h is toric a l uti l i sa tion ra te (%)

60%

65%

70%

75%

80%

85%

90%

95%

100%

2005 2006 2007 2008 2009 2010

AHTS PSV

AHTS

0

50

100

150

200

250

300

350

2004 2005 2006 2007 2008 2009 2010 2011YTD

No

. o

f ve

sse

ls o

rde

red

<8,000 bhp 8,000 - 12,000 bhp > 12,000 bhp

PSVs

0

50

100

150

200

2004 2005 2006 2007 2008 2009 2010 2011YTDN

o.

of

vess

els

ord

ere

d

<3,000 dwt 3,000-4,000 dwt >4,000 dwt

Page 20: STX OSV Holdings Limited

Company Focus

STX OSV Holdings Limited

Page 20

Day rates for global AHTS term fixtures Source: ODS Petrodata, DBS Vickers Delivery profile of the outstanding PSV orderbook Source: Clarksons, DBS Vickers Delivery profile of the outstanding AHTS orderbook

Source: Clarksons, DBS Vickers

Demand for OSVs to grow, proxied by higher rig count. We use contracted offshore rig count as a proxy for OSV demand (both AHTS and PSVs). According to data from ODS Petrodata, the demand for offshore rigs (jackups, semisubmersibles and drillships) is projected to grow by 93 units by end 2011, representing a growth of 18% from current levels, underpinning near term demand for OSVs. Expect PSVs to continue to dominate near term orders. Looking ahead, we expect newbuild orders to continue to be dominated by PSVs given 1) projected increase in demand on the back of a higher projected contracted offshore rig count, 2) the current healthier demand/supply balance of PSVs to rigs, vs. AHTS; 3) smaller orderbook to existing fleet (10.9% vs. 12.2% for AHTS); 4) replacement demand on a highly aged fleet, and 5) the more staggered delivery profile of the outstanding orderbook across 2011-2014. AHTS orders to return in a more significant way from 2012. Notwithstanding the expected pick up in demand for OSVs, we only expect AHTS newbuild orders to recover in a more significant way from 2012 onwards, as the market continues to digest the additional capacity being delivered from the orderbook. We expect this to be led by the >8,000 BHP sized categories as E&P activities move into more demanding environments, supported by a healthier demand/supply ratio of 2.4x AHTS (>8,000 BHP) per rig (floater) vs. 3.2x for the smaller AHTS (<8,000 BHP) category.

0

50

100

150

200

250

2011 2012 2013 2014+

No

. o

f ve

sse

ls

< 4,000 bhp 4,000 - 7,999 bhp 8,000 - 12,000 bhp > 12,000 bhp

0

20

40

60

80

100

120

2011 2012 2013 2014+

No

. o

f ve

sse

ls

<2,000 dwt 2,000-3,000 dwt 3,000-4,000 dwt >4,000 dwt

Page 21: STX OSV Holdings Limited

Company Focus

STX OSV Holdings Limited

Page 21

Sustained recovery in margins to underpin 15% FY10-12 EPS CAGR Leading builder and designer of high end OSVs. The design and construction of complex and highly customized OSVs and other specialized vessels, accounts for the bulk (>90%) of STX OSV’s revenue. The group also derives a small but growing proportion of revenue from the sale of its own vessel designs to third parties, often in packages with main vessel equipment, which contributed 1-3% to revenue over FY07-09. Note that from FY10 onwards, STX OSV no longer discloses revenue breakdown. STX OSV has secured a slew of orders since IPO. The global financial crisis and resulting tight credit market had led to a sharp fall in the number of vessel orders secured by STX OSV from 28 in 2007 to 4 and 8 units in 2008/2009. Orders have since returned, with 14 vessels ordered since its listing in November 2010, bringing total FY10 order wins to 27 units and 8 for FY11 YTD. This was, perhaps, not surprisingly, dominated by PSV orders, which accounts for 63%/100% of FY10/FY11 YTD orders. Current backlog provides visibility to beyond FY12. As of end March 2011, STX OSV had an outstanding order backlog of NOK15.0bn for 46 vessels (10 AHTS, 27 PSVs, 2 OSCVs, 7 Others), to be progressively delivered up to 2013. Including the orders for 3 multi-role vessels and 2 PSVs secured in April and May 2011 (estimated at NOK1.3m in total) and the contracts for the construction of the eight Transpetro LPG carriers worth US$536.3m (approx NOK3.1bn), pending financing approval from Brazil’s Merchant Marine Fund, this will bring order backlog to c. NOK19.4bn. This will underpin earnings visibility up to FY16. Note that STX OSV’s order backlog includes not only newbuilding orders, but also unannounced variation orders, trading packages, as well as currency adjustments. Order wins to pick up over 2H 2011 to 2013. We have assumed order wins of NOK13bn for FY11, which includes the 8 Transpetro LPG carriers and c. NOK2.4bn worth of orders secured in FY11 YTD. We expect orders to pick up over the course of the year, forming the remaining NOK7.5bn of order wins for FY11. This is in line with management’s expectations based on an increased level of project enquiries. We forecast order wins of NOK12bn/NOK15bn in FY12/FY13. This is expected to be supported by 1) asset replacement demand, 2) increase in demand proxied by a higher contracted offshore rig count projected by ODS Petrodata, 3) requirement for advanced, high spec vessels as E&P activities move into more challenging environments. 8% revenue CAGR over FY10-12. STX OSV generally takes 18 to 24 months to construct and deliver a vessel to its

customers. This is slightly shorter for less complex PSVs, at 13-15 months currently. Depending on the mix of vessel types and vessel sizes in the orderbook, the group is able to deliver between 23 and 25 OSVs a year. Based on an assumed average recognition period of 21 months, we project FY11/12 revenue of NOK12.4bn/NOK13.8bn, representing 8% CAGR over FY10-12. STX OSV has seen a return of vessel orders Source: STX OSV, DBS Vickers Vessel delivery schedule

NB: This includes the 8 LPG carriers for Transpetro, to be delivered

over 2014-16.

Source: STX OSV, DBS Vickers Past execution missteps led to poor historical margins. STX OSV delivered poor results over FY07-09 (net loss in FY08). Design flaws in third party vessel designs, late delivery of several critical components and higher cost of raw materials (AH Series, Bramax and others) caused significant cost overruns and penalties, resulting in c. -1.6ppt/-4.9ppt/

Order intake

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

FY07 FY08 FY09 FY10 FY11F FY12F FY13F

NOK m

Secured orders Assumed orders Transpetro LPG carriers

24 2522 21

6

19

24

8 8

0

5

10

15

20

25

30

FY07

FY08

FY09

FY10

FY11

F

FY12

F

FY13

F

FY14

-16

No

. o

f ve

sse

ls

Delivered Under construction

Page 22: STX OSV Holdings Limited

Company Focus

STX OSV Holdings Limited

Page 22

-1.7ppt impact on the reported FY07-09 EBITDA margins. Looking ahead, we believe the predominant use of internally developed and proven vessel designs and timely deliveries by suppliers will help mitigate the reoccurrence of such issues in the future. Steady expansion in margins since late 2009. Since 3Q09, STX OSV has delivered a steady expansion in EBITDA (EBIT) margins, from 5.8% (4.8%) in 3Q09 to 13.8% (12.8%) in 1Q11. Indeed, we note that since 3Q10, the group has managed to sustain its EBIT margins at >11%. Good project execution and efficiency gains are main drivers for recovery in margins. STX OSV has taken steps to strengthen the integration of the design, engineering and construction phases in the value chain between Romania and Norway. This has led to improved operational performance from the streamlining of production processes, as well as advances in the Romanian yards’ engineering capabilities, allowing a larger proportion of more complex work (e.g. piping, electrical wiring) to be performed at the lower cost region. Greater cost efficiency along with good execution has positively impacted margins for both delivered and ongoing projects. Indeed, the group continues to record a high rate of on time deliveries, with >95% of vessels delivered without penalties in FY10 and several vessels delivered before contractual delivery date. Margin recovery to be sustained. On the back of the implementation of these operational measures, we project STX OSV to maintain its margins above guidance, posting FY11/12 gross margins of 30.2%/29.3% vs. FY10’s 30.0%.

This translates into FY11/12 EBITDA margins of 11.4%/ 10.9% vs. FY07-10’s average of 4.0%. Typical cost drivers for the various vessel types

Components of cost of vessel construction AHTS PSV OSCV Others Engine & machinery 24% 12% 21% 14% Other equipment 37% 43% 36% 39% Hull (ex steel) 14% 19% 16% 19% Steel 4% 5% 5% 5% Labour 9% 9% 10% 12% Finance cost 3% 2% 2% 1% Others 10% 11% 10% 10%

Total 100% 100% 100% 100%

Source: STX OSV STX OSV quarterly revenue and EBIT margins Source: STX OSV, DBS Vickers

Segmental Analysis

FY Dec (NOK m) FY07 FY08 FY09 FY10 FY11F FY12F FY13F Revenue Offshore & specialised vessels 8,829 11,219 11,751 11,881 12,439 13,794 14,277 Other operations 601 152 144 0 0 0 0

Total 9,431 11,370 11,895 11,881 12,439 13,794 14,277

Revenue backed by secured orders 11,947 6,379 1,155 % of annual revenue backed by secured orders 96.0% 46.2% 8.1% Gross Profit 2,023 1,808 2,779 3,563 3,754 4,043 4,140 Gross Profit Margins (%) 21.5% 15.9% 23.4% 30.0% 30.2% 29.3% 29.0% EBITDA 120 (201) 648 1,330 1,415 1,505 1,542 EBITDA Margins (%) 1.3% -1.8% 5.5% 11.2% 11.4% 10.9% 10.8% Annual order intake 15,461 5,692 4,458 12,555 13,000 12,000 15,000 Order backlog (as at end of period) 27,363 22,389 16,411 17,031 17,592 15,798 16,521 Book-to-bill ratio 2.4 1.9 1.4 1.4 1.3 1.1 1.0

Source: STX OSV, DBS Vickers

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

NOK m

0%

2%

4%

6%

8%

10%

12%

14%

Revenue EBIT margins

Page 23: STX OSV Holdings Limited

Company Focus

STX OSV Holdings Limited

Page 23

Key Risks Risk of cost overruns on fixed price contracts is higher in a rising cost environment. Most of STX OSV’s shipbuilding projects are fixed price contracts, except for a few that include price adjustment provisions in the event of steel price increases. To mitigate the risk of cost overruns, STX OSV typically negotiates the price of major equipment and supplies, and will factor in all such costs in contract price on contract signing. Labour and funding costs are two major cost drivers that are not hedged, and are priced into the contract based on best estimates for inflation. Late delivery of vessels. Many of STX OSV’s contracts provide for damages for late delivery. While it typically has a 30-day grace period beyond contractual delivery date to deliver the vessel to its customers, any substantial delay could result in the group being liable to pay its customers liquidated damages. Such delays could arise due to delay of certain key materials, equipment or components from its suppliers. Compensation from third party design contracts may not adequately cover losses. STX OSV occasionally uses third party vessel designs. In the event of a delay in vessel delivery due to design flaws, the design purchase contract typically provides for compensation by way of liquidated damages. However, the contracts typically include a cap on the compensation amount, and the compensation available under the contracts may be less than the actual losses suffered by the group. Back-end loaded payment terms implies heavy reliance on external sources to fund working capital. The payment terms STX OSV typically extends to its customers is back-end loaded, with 20% upfront and the remaining 80% upon delivery. This implies STX OSV’s access to ready financing is crucial to the business to fund its working capital. This is met via construction loans from banks. As such, we believe a potential deterioration of the credit markets is a risk to the group’s access to funding as well as its customers’ ability to

pay for the vessels. However, we note that through the recent global financial crisis, STX OSV did not experience issues on accessibility to funds or any customer defaults or cancellations. Threat of new entrants. There have been many new entrants to the OSV shipbuilding industry in recent years, especially from more cost efficient countries such as Korea and China. This could result in an increased competition for a limited number of new orders, adversely impacting pricing power, or significantly push down prices for newbuilds. Forex risks. STX OSV’s shipbuilding contracts are mainly denominated in NOK and, for certain orders in Brazil, Romania and Vietnam, in US dollars. Costs are incurred mainly in NOK, Euro, US dollars, Real, RON and Vietnamese Dong. This exposes the group to forex risks, which is mitigated by hedging most of its forex exposure that arises from foreign currency transactions with the use of financial instruments/ hedge contracts. Share overhang from potential placement by parent. It was recently reported in the media that STX Europe, parent company of STX OSV, may look to divest a 20% stake in the latter. While STX Europe is subject to a 12-month lock-up period (ending 12 November 2011) for its interests in STX OSV, it may, however, after the first 6 months from listing (i.e. from 12 May 2011), be granted exemptions from this with the prior written consent of the Sole Global Coordinator. This share overhang could weigh on share price performance in the near term. However, we believe with a larger free float, this would be beneficial to the stock’s liquidity in the longer term. Nonetheless, with STX Europe intending to hold a majority stake in STX OSV, this implies that it could potentially divest up to c. 18.9% of its current 69.02% stake, to hold 50.1% post divestment.

Page 24: STX OSV Holdings Limited

Company Focus

STX OSV Holdings Limited

Page 24

Quarterly / Interim Performance A robust 1Q11. Headline net profit was up 28% y-o-y to NOK310m; stripping out exceptionals from unqualified hedges and embedded derivatives, we estimate recurring net profit to be NOK303m, +150% y-o-y. This robust set of results was driven by higher revenues (+20% to NOK3.2bn) and 3.0ppt expansion in EBIT margins to 13.8%. The group delivered 6 vessels (2 AHTS, 2 PSVs, 2 OSCVs) during the quarter.

Margins continue to develop positively. STX OSV continues to display sustained improvement in its operating margins. Management attributed this to sustained good project execution with high rate of on-time deliveries, implementation of cost efficiency measures, and improved operational performance from stronger integration and good collaboration between design, engineering and construction in the Romania-Norway value chain.

Quarterly / Interim Income Statement (NOK m) FY Dec 2Q2010 3Q2010 4Q2010 1Q2011

Turnover 3,527 2,136 3,572 3,192 Cost of Goods Sold (2,729) (1,269) (2,507) (2,201) Gross Profit 798 867 1,065 991 Other Oper. (Exp)/Inc (590) (501) (690) (582) Operating Profit 208 366 375 409 Other Non Oper. (Exp)/Inc 0 0 0 0 Associates & JV Inc 3 2 2 2 Net Interest (Exp)/Inc 1 2 4 7 Exceptional Gain/(Loss) 201 (29) 18 7 Pre-tax Profit 413 341 399 425 Tax (71) (186) (72) (113) Minority Interest 1 (2) (31) (2) Net Profit 343 153 296 310 Net profit bef Except. 142 182 278 303 EBITDA 241 398 409 440 Sales Gth (%) 33.3 (39.4) 67.2 (10.6) EBITDA Gth (%) (15.7) 65.1 2.8 7.6 Operating Profit Gth (%) (18.8) 76.0 2.5 9.1 Net Profit Gth (%) 41.7 (55.4) 93.5 4.7 Gross Margins (%) 22.6 40.6 29.8 31.0 Operating Margins (%) 5.9 17.1 10.5 12.8 Net Profit Margins (%) 9.7 7.2 8.3 9.7 Source: Company, DBS Vickers

Page 25: STX OSV Holdings Limited

Company Focus

STX OSV Holdings Limited

Page 25

Financials – Income Statement Cleaning up its act paid off in FY10. STX OSV posted a robust FY10 performance, with an almost 11-fold y-o-y increase in headline net profit to NOK1.0bn. Excluding exceptionals (unqualified hedged and embedded derivatives, other financial income/expenses, forex gains/losses), we estimate recurring net profit to be NOK722m, +53% y-o-y, despite flattish revenues. Improved project execution across FY10 was the driver for the significant 5.8ppt expansion in EBIT margin to 10.2%. More than 95% of vessels delivered in 2010 were without penalties, vs. FY09, which booked operating losses/late delivery penalties of c. NOK205m.

STX OSV to deliver steady FY10-12 EPS CAGR of 15%. Despite yard capacity being full till late 2012/early 2013, we expect STX OSV to post FY11/12 recurring earnings of NOK896m/NOK949m, representing a 2-year CAGR of 15%. This will be underpinned largely by improved project execution and efficiency gains, resulting in superior EBITDA margins of >10% over the FY11-12 forecast period vs. FY07-10’s average of 4.0%.

FY Dec (NOK m) 2008A 2009A 2010A 2011F 2012F 2013F

Turnover 11,370 11,895 11,881 12,439 13,794 14,277 Cost of Goods Sold (9,562) (9,116) (8,318) (8,685) (9,751) (10,137) Gross Profit 1,808 2,779 3,563 3,754 4,043 4,140 Other Opg (Exp)/Inc (2,131) (2,254) (2,357) (2,463) (2,669) (2,737) Operating Profit (323) 525 1,206 1,290 1,373 1,403 Other Non Opg (Exp)/Inc 0 1 0 0 0 0 Associates & JV Inc 0 7 8 8 8 8 Net Interest (Exp)/Inc (59) 5 11 22 16 3 Exceptional Gain/(Loss) 245 (378) 309 0 0 0 Pre-tax Profit (137) 160 1,534 1,320 1,397 1,414 Tax (20) (66) (468) (396) (419) (424) Minority Interest 4 1 (35) (28) (29) (30) Preference Dividend 0 0 0 0 0 0 Net Profit (153) 95 1,031 896 949 960 Net profit before Except. (398) 473 722 896 949 960 EBITDA (201) 648 1,330 1,415 1,505 1,541.9 Sales Gth (%) 20.6 4.6 (0.1) 4.7 10.9 3.5 EBITDA Gth (%) (267.1) (422.3) 105.1 6.4 6.3 2.5 Operating Profit Gth (%) (2,267.8) (262.7) 129.5 7.0 6.4 2.2 Net Profit Gth (%) (483.5) (162.1) 985.3 (13.1) 5.8 1.2 Effective Tax Rate (%) N/A 41.3 30.5 30.0 30.0 30.0 Source: Company, DBS Vickers

Sales Trend Operating Cost Trend Profitability Trend

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2009A 2010A 2011F 2012F 2013F

NOK m

0.0%2.0%4.0%6.0%8.0%10.0%12.0%14.0%16.0%18.0%20.0%

Total Revenue Revenue Growth (%) (YoY)

0

2000

4000

6000

8000

10000

12000

2009A 2010A 2011F 2012F 2013F

Other Operating Expenses (-)Cost of Goods Sold (-)

0

200

400

600

800

1000

2009A 2010A 2011F 2012F 2013F

NOK

-171%

29%

229%

429%

629%

829%

1029%

Net Profit (After-extraordinaries) (LHS)Net Profit Growth (%) (YoY) (RHS)

Page 26: STX OSV Holdings Limited

Company Focus

STX OSV Holdings Limited

Page 26

Financials – Balance Sheet Historically high net gearing. STX OSV had a high historical net gearing level, ranging from 3.4-6.0x over FY07-09. This was mainly attributable to construction loans required to finance the construction of vessels in its orderbook given the back-end loaded payment terms extended to its customers, as well as its low equity base across this period. Following the group’s successful IPO on the SGX, its net gearing improved significantly, to 0.78x as at end FY10, and 0.17x as at end 1Q11. Expect gearing level to fluctuate. STX OSV’s net gearing level is generally a function of the number of vessels delivered

during the period as well as the overall percentage of completion of the group’s order backlog. The group typically collects the outstanding balance of the contracted amount from customers upon vessel delivery, while paying down the amount drawn under the construction loans. This will be offset by other projects under construction, for which the group may draw down on the construction loans according to the percentage of completion of the respective projects. As such, investors should note that net gearing is likely to fluctuate quarter to quarter. We project net gearing of 0.57x and 0.55x by end FY11/12.

FY Dec (NOK m) 2008A 2009A 2010A 2011F 2012F 2013F

Net Fixed Assets 1,122 1,065 1,012 1,240 1,461.8 1,639 Invts in Assocs & JVs 74 81 169 246 254 262 Other LT Assets 447 624 487 484 481 478 Cash & ST Invts 1,660 1,604 2,851 3,118 2,950 2,419 Inventory 7,977 9,112 5,918 5,428 6,501 7,798 Debtors 3,350 1,999 1,816 1,944 2,155 2,231 Other Current Assets 0 0 0 0 0 0 Total Assets 14,630 14,485 12,253 12,460 13,803 14,827 ST Debt

6,026 6,173 4,442 4,442 4,442 4,442 Other Current Liab 6,681 6,240 4,795 4,055 4,513 4,676 LT Debt 493 335 266 441 616 773 Other LT Liabilities 597 703 332 332 332 332 Shareholder’s Equity 804 1,015 2,378 3,123 3,803 4,478 Minority Interests 29 19 40 68 97 127 Total Cap. & Liab. 14,630 14,485 12,253 12,460 13,803 14,827 Leverage Analysis (x) Net Interest Cover (5.5) N/A N/A N/A N/A N/A EBITDA Gross Interest Cover (2.3) 16.2 53.2 53.2 40.5 32.4 Total Debt to EBITDA (32.4) 10.0 3.5 3.5 3.4 3.4 Total Debt to Total Assets 0.4 0.4 0.4 0.4 0.4 0.4 Total Debt to Capital 7.8 6.3 1.9 1.5 1.3 1.1 Net Debt to Equity 5.8 4.7 0.8 0.6 0.5 0.6 Net Debt to Equity ex MI 6.0 4.8 0.8 0.6 0.6 0.6 Capex to Debt 0.0 0.0 0.0 0.1 0.1 0.1 Liquidity Analysis (x) Cash Ratio 0.1 0.1 0.3 0.4 0.3 0.3 Current Ratio 1.0 1.0 1.1 1.2 1.3 1.4 Quick Ratio 0.4 0.3 0.5 0.6 0.6 0.5

Source: Company, DBS Vickers

Breakdown of Assets (2011) Breakdown of Capital (2011) Financial Leverage & Net Debt to Equity

Net Fixed Assets - 10.6% Bank, Cash

and Liquid Assets - 26.6%

Inventory - 46.3%

Debtors - 16.6%

Common Shareholders' Equity -

33.6%

ST Debt - 62.7%

LT Debt - 3.8%

1,588

2,088

2,588

3,088

3,588

4,088

4,588

5,088

2009A 2010A 2011F 2012F 2013F0.5

2.5

4.5

6.5

8.5

10.5

12.5

14.5

Net Debt/(Cash) Net Debt to Equity (X) (R.H.S)

Financial Leverage (X) (R.H.S)

Page 27: STX OSV Holdings Limited

Company Focus

STX OSV Holdings Limited

Page 27

Financials – Cash Flow Capex relates mainly to the new Brazilian yard. As per the IPO prospectus, the group estimates capex to be around NOK990m. This will be directed towards the expansion and improvement of yard capacity, contruction of the new shipyard in Brazil, improvement of capacity and equipment at the Romania and Vietnam yards, as well as other acquisitions and investments. With capex of NOK23m incurred in 4Q10, we have spread out the outstanding capex budget across FY11-13. This will be mainly driven by the development of the second yard in Brazil over 2011 to 2013 , with a total development cost of c. US$100m, of which, around 70% could be debt financed.

Target 30% dividend payout ratio implies attactive yield of 4.2-4.5%. STX OSV aims to pay a stable and rising divdend over time. To this end, it aims to pay out annual dividends of not less than 30% of its PATMI. This will translate into a dividend yield of 4.2-4.5% over the FY11-12 periods. FY10 payout ratio of 15% is likely to be an exception – this was based on 100% payout of the group’s profits made between 25 October to end December 2010, based on the short consolidation period under the new group structure.

FY Dec (NOK m) 2008A 2009A 2010A 2011F 2012F 2013F

Pre-Tax Profit (137) 160 1,534 1,320 1,397 1,414 Dep. & Amort. 122 123 124 125 131 139 Tax Paid (19) (3) (79) (357) (396) (419) Assoc. & JV Inc/(loss) 0 (7) (8) (8) (8) (8) Chg in Wkg.Cap. 275 (384) 200 (417) (849) (1,215) Other Operating CF (210) 383 (803) 0 0 0 Net Operating CF 30 272 968 663 275 (90) Capital Exp.(net) (172) (174) (80) (350) (350) (313) Other Invts.(net) 10 5 8 0 0 0 Invts in Assoc. & JV 0 0 (83) (69) 0 0 Div from Assoc & JV 0 0 0 0 0 0 Other Investing CF 2 (30) 7 0 0 0 Net Investing CF (160) (199) (148) (419) (350) (313) Div Paid 0 0 0 (152) (269) (285) Chg in Gross Debt (471) 453 (96) 175 175 157 Capital Issues 0 100 605 0 0 0 Other Financing CF 150 (42) 129 0 0 0 Net Financing CF (321) 511 638 23 (94) (128) Net Cashflow (451) 584 1,458 267 (168) (531) Opg CFPS (NOK) (0.2) 0.7 0.7 0.9 1.0 1.0 Free CFPS (NOK) (0.1) 0.1 0.8 0.3 (0.1) (0.3) Source: Company, DBS Vickers

Cash Flow Trend Free Cash Flow Per Share Free Cash Flow As At Year End

-584

-84

416

916

1,416

2009A 2010A 2011F 2012F 2013F

CF from Op CF from Invt CF from Fin

(0.38)

(0.18)

0.02

0.22

0.42

0.62

0.82

1.02

2009A 2010A 2011F 2012F 2013F

Free Cash Flow Per Share Free Operating Cash Flow Per Share

100

200

300

400

500

600

700

800

900

2009A 2010A 2011F 2012F 2013F

Page 28: STX OSV Holdings Limited

Company Focus

STX OSV Holdings Limited

Page 28

Financials – ROE Drivers Normalised ROAE of >20% can be expected. STX OSV posted an exceptionally high ROAE of 60.8% in FY10, mainly due to a robust earnings performance and a low average equity base

(due to low pre-IPO equity base). Post IPO, we expect ROAE to normalise at >20%, supported by stable margins and gearing levels.

FY Dec 2008A 2009A 2010A 2011F 2012F 2013F

Profitability Ratios Sales Growth (%) 20.6 4.6 (0.1) 4.7 10.9 3.5 Gross Margin (%) 15.9 23.4 30.0 30.2 29.3 29.0 Operating Margin (%) (2.8) 4.4 10.2 10.4 10.0 9.8 Net Profit Margin (%) (1.3) 0.8 8.7 7.2 6.9 6.7 ROAE (%) (19.9) 10.4 60.8 32.6 27.4 23.2 ROA (%) (1.3) 0.7 7.7 7.3 7.2 6.7 ROCE (%) (4.9) 3.8 10.7 11.4 10.9 10.1 Activity Ratios Debtors Turn (average days) 80.6 82.1 58.6 55.2 54.2 56.1 Creditors Turn (average days) 188.7 252.8 230.2 167.8 142.8 148.2 Inventory Turn (average days) 225.4 342.1 329.8 238.4 223.3 257.4 Total Asset Turnover (x) 1.0 0.8 0.9 1.0 1.1 1.0 Fixed Asset Turnover (x) 11.0 10.9 11.4 11.0 10.2 9.2 Source: Company, DBS Vickers

ROAE / ROAA Trend (%) Margin Trend (%) Total Debt & Gross Interest Cover

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

2009A 2010A 2011F 2012F 2013F

Ret on Avg Equity (ROAE) % Ret on Avg Assets (ROAA) %

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2009A 2010A 2011F 2012F 2013F

EBITDA Margin % EBIT Margin % Net Income Margin %

0

1000

2000

3000

4000

5000

6000

7000

2009A 2010A 2011F 2012F 2013F11.2x

16.2x

21.2x

26.2x

31.2x

36.2x

41.2x

46.2x

51.2x

Total Debt (+) Gross Interest Cover (X) (YoY)

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Valuation Comparables. STX OSV is a leading global builder and designer of advanced, high specification and highly customised offshore support vessels. Its main competitors are predominantly Norwegian and European shipyards that focus on developing own design concepts and innovations. These include Ulstein Group ASA, Kleven Maritime AS, Havyard Group AS, and Bergen Group ASA from Norway, and IHC Merwede B.V. in the Netherlands for certain specialized vessels. However, most of these yards are not listed. In Asia, its most likely competitors with such capabilities would include the established yards like Keppel Corp and Sembcorp Marine in Singapore, as well as the Korean yards like Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering, and Samsung Heavy Industries. These yards, however, tend to focus on the bigger value projects such as rigbuilding (jackups, semisubmersibles and drillships), FPSO conversion and newbuildings, production topsides and so on; specialised shipbuilding projects are not their core earnings driver. The other Singapore listed OSV builders include Jaya and ASL Marine, which generally focus on small to mid sized OSVs, and Otto Marine which focuses on mid to large OSVs. While in a similar space, we believe STX OSV stands out for its track record in OSVs and its strong in-house design and engineering capabilities.

PE multiple used as our primary valuation methodology. We believe the PE multiple is the most appropriate methodology to use in valuing STX OSV as earnings and earnings growth are key value drivers for this company, and PE is widely used as a relative measure among the Singapore-listed yards, both large and small/mid caps. Target price of S$1.86 on 11x blended FY11/12 PE. Given STX OSV’s unique positioning in the industry, we use a valuation multiple of 11x PER, derived from the average historical forward PE among the large (13.3x) and small/mid cap (8.2x) Singapore listed yards. Applying this to blended recurring FY11/12 EPS, we drive a target price of S$1.86. Unwarranted discount to smaller local yards, initiate coverage with BUY; upside of 55%. At 7x FY11 PE, STX OSV is trading at an unwarranted discount to peers. Valuations are supported by steady 15% earnings CAGR over FY10-12 (vs. negative to flattish FY11F earnings growth among Singapore peers) on a sustained recovery in margins and an attractive dividend yield of 4.2-4.5%. We initiate coverage on STX OSV with a BUY recommendation, with 55% upside to our TP of S$1.86. We view potential near term catalysts from the approval of financing on the 8 Transpetro LPG carriers, which will make the contracts effective, as well as OSV order wins.

Peers comparison

Source: Bloomberg, DBS Vickers

Company Curncy FYE Mkt PriceCap (S$)

(US$m) 10F 11F 12F 10 11F 10F 11F

Keppel Corp Ltd SGD Dec 14,754.3 11.40 14.2 14.3 12.9 3.0 2.7 10.3 10.5SembCorp Marine Ltd SGD Dec 8,884.6 5.33 13.7 15.5 14.5 4.3 4.3 7.6 10.0Cosco Corp Singapore Ltd SGD Dec 3,687.9 2.06 20.9 18.3 15.2 3.8 3.4 9.7 7.2Average 16.3 16.0 14.2 3.7 3.5 9.2 9.2

ASL Marine Holdings Ltd SGD 06/2010 210.1 0.62 6.9 9.3 7.4 0.8 0.8 5.6 5.1Jaya Holdings Ltd SGD Jun 351.0 0.57 3.7 6.4 7.0 0.9 0.8 3.6 5.1Otto Marine Ltd SGD 12/2010 333.9 0.22 10.1 10.1 10.0 0.9 0.8 12.5 11.3Average 6.9 8.6 8.1 0.9 0.8 7.3 7.2

ABG Shipyard Ltd INR 03/2010 409.1 360.55 8.5 7.9 6.7 1.7 1.4 8.9 7.8Bharati Shipyard Ltd INR 03/2011 94.6 145.45 3.1 7.7 92.3 0.5 - 7.9 8.0Bergen Group AS NOK 12/2010 86.0 7.90 NM 6.9 3.4 0.3 0.3 3.5 2.6Coastal Contracts Bhd MYR 12/2010 431.2 3.62 6.5 6.3 6.1 2.2 1.6 5.3 5.1Average 6.0 7.2 27.1 1.2 1.1 6.4 5.9

Daewoo Shipbuilding & Marin KRW 12/2010 7,586.2 41,850 10.5 11.1 12.9 2.0 1.8 8.5 8.4Hyundai Heavy Industries Co KRW 12/2010 32,805.8 445,500 7.6 8.1 7.9 2.1 2.0 7.1 6.8Samsung Heavy Industries C KRW 12/2010 9,405.1 42,650 10.8 12.2 12.8 2.5 2.3 8.6 8.6STX Offshore & Shipbuilding KRW 12/2010 2,060.0 27,500 28.6 14.9 6.0 1.3 1.2 5.9 4.1Average 14.4 11.6 9.9 2.0 1.8 7.6 7.0

STX OSV Holdings Ltd SGD Dec 1,084.9 1.15 8.4 6.8 6.4 2.5 1.9 5.9 5.5

EV/EBITDAPE (x) P/BV (x)

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Appendix 1) Management team STX OSV’s senior management team is led by Mr Roy Reite, Executive Director and Chief Executive Officer. The team of industry veterans have an average of over 15 years of industry experience, and a have proven execution track record. Along with their wealth of experience, they have also established solid long term relationships with customers, as well as a

thorough understanding of their various requirements. Through their close working relationships with their customers together with first hand market knowledge, this enables the team at STX OSV to develop technologically advanced prototype vessels.

Management Team

Manager name Position Details Mr. Roy Reite Executive Director

& Chief Executive Office

Mr. Reite is responsible for managing the day-to-day operations of the company. He has been president of STX OSV since 2001. He has extensive industry experience, having worked in the current industry since 1990. Presently, Mr. Reite is also the deputy chairman of Sparebanken More, a Norway-based regional bank, and holds a Master of Science from the Norwegian University of Science and Technology.

Jan Ivar Nielsen Executive Vice President & CFO

Mr. Nielsen serves as the head of the Finance Department. He joined the Group in 2007 as Vice President of Finance of the Group's operations in Brazil, and was made CFO of the Group in 2009. Mr. Nielsen has extensive experience in the finance and shipping business, having worked in Kvaerner Philadelphia Shipyard Inc., Aker American Shipping ASA, Kvaerner PLC, STX Finland, Kvaerner Mandal AS, Hunsfos Fabrikker AS, and Elkem Fiska AS in various capacities since 1990. Mr. Nielsen holds an accounting degree from Agder Distriktshogskole, and MSc in Business from Bodo Graduate School of Business in Norway, and an Executive MBA degree from Temple University in USA.

Mr. Magne Haberg Executive Vice President, Sales & Marketing

Mr. Haberg joined the Group in 2001 as a project manager at STX OSV Langsten, and subsequently rose to senior vice president in sales and marketing in 2004. Mr. Haberg previously served as a subsea and hydraulic engineer, and a technical chief engineer assistant at Smedvik Drilling AS, and an engineer and mechanic at Wilh Wilhelmsen ASA. Mr. Haberg received a Diploma in Engineering from the Alesund Maritime College, and was a Chief Engineer at the Alesund Maritime College in Alesund, Norway.

Mr. Stig Bjorkedal Executive Vice President, Business Development & Strategy

Mr. Bjorkedal joined the Company in 2006, having been vice president of Deck Machinery in Rolls Royce Marine AS in Brattvaag. Mr. Bjorkedal holds a Bachelor’s degree in Naval Architecture from University of More og Romsdal in Alesund, Norway, and a Master of Management degree from BI Executive School in Oslo, Norway.

Mr. Knut Ola Tverdal

Executive Vice President, Strategy Implementation

Mr Tverdal joined the Group in 2000, and is also the yard director at STX's Aukra yard in Norway, and oversees operations in the yard in Vung Tau, Vietnam, and the yard in Niteroi, Brazil. He was previously the VP of production at Kvaerner Philadelphia Shipyard from 2003 to 2005, and prior to that he worked at STX OSV from 2000 to 2003. Mr. Tverdal holds a Master of Science degree from the Norwegian University of Science and Technology in Trondheim.

Mr. Magne O. Bakke

Executive Vice President & Chief Operating Officer

Mr. Bakke is head of the shipyard operations at STX OSV, overseeing STX's Norway and Romania operations. Prior to that, he served as the director the STX's Soviknes yard from 2005 to 2009. Mr Bakke has extensive experience in procurement, engineering and project management in offshore field development projects, having joined the Group in 1984. Mr. Bakke has a BSc in Civil Engineering degree from More og Romsdal State College of Engineering in Alesund, Norway and a BSc in Marine Technology degree from the Aust-Agder State College of Engineering in Norway.

Source: STX OSV

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2) Significant shipbuilding milestones achieved

Name of vessel delivered Vessel type

Year of delivery Owner Comments / innovations

Island Frontier Well

intervention vessel

2004 Island Offshore

First vessel built to the class notation "Well Intervention" - designed for operations previously performed by drilling units.

Skandi Arctic Diving support vessel

2009 DOF A diving support vessel with a completely new type of facilities based on a computer-based dive control system used to support a 24-man diving chamber complex, which is believed to provide an improved work environment for the divers.

Normand Prosper

AHTS 2010 Solstad Offshore

An AHTS with a 24m wide extreme beam, providing significantly improved stability in anchor handling operations in harsh seawater conditions compared to many other AHTSes with beam widths typically less than 20m. It is also believed to be one of the most powerful AHTSes built at the time with approximately 32,500 BHP and a bollard pull of nearly 350 tons.

TBN (Yard No. 738)

PSV 2011 DOF Scheduled to be delivered in 2011, this will be the first LNG-powered PSV equipped with STX OSV's new LNG storage solution whereby LNG storage is located outside the cargo area, allowing more cargo tank capacities for commercial operations.

Source: STX OSV, DBS Vickers 3) Industry awards STX OSV has won “Ship of the Year” award 6 times in the last 10 years

Year awarded Vessel name Vessel type Owner 2000 Glutra Gas powered car and passenger ferry

More & Romsdal Fylkesbater

2002 KV Svalbard Coast guard vessel Royal Norwegian Navy Material Command

2004 Viking Avant Platform supply vessel

Eidesvik

2008 Island Wellserver Subsea riserless well intervention vessel

Island Offshore

2009 Far Samson Multifunctional plough tug supply subsea service vessel

Farstad Shipping

2010 Skandi Aker Offshore Subsea Construction vessel (OSCV 06)

DOF

NB: Award by major Nordic shipping magazine, Skipsrevyen

Source: STX OSV, DBS Vickers

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4) STX OSV’s 2011 YTD order wins

Date announced Vessel type Design Capacity

Design source

No. of units

Value (NOK m) Customer

Scheduled delivery Shipyard

1Q 2011 total 3 1,182.0 15-Feb-11 PSV PSV 09 4700 dwt Internal (STX

OSV Design) 1 325.0 Undisclosed

international customer

2012 Aukra, Norway; hull to be delivered from STX OSV's Romania yard

27-Mar-11 PSV PSV 08 4000 dwt Internal (STX OSV Design)

1 300.0 NorSea Group AS, based in Stavanger, Norway - a leading supplier of base services and integrated logistics solutions for the oil and gas industry in Norway.

Jun-12 Brattvaag, Norway; Hull to be delivered from STX OSV's yard in Romania

31-Mar-11 PSV PSV 09 4700 dwt Internal (STX OSV Design)

1 325.0 Undisclosed customer 2012 Norway

1Q 2011 Unannounced order wins

232.0

2Q 2011 total 5 1,260.0 8-Apr-11 Multi role

vessel MRV 05 3500 DWT

(approx) Internal (STX OSV Design)

1 220.0 DOF ASA 2H2012 Aukra, Norway; hull to be delivered from STX OSV's Romania yard

8-Apr-11 Multi role vessel

MRV 05 ROV

3500 DWT (approx)

Internal (STX OSV Design)

1 220.0 DOF ASA 2H2012 Aukra, Norway; hull to be delivered from STX OSV's Romania yard

8-Apr-11 Multi role vessel

MRV 05 SP

3500 DWT (approx)

Internal (STX OSV Design)

1 220.0 DOF ASA 2H2012 Brattvaag, Norway; Hull to be delivered from STX OSV's yard in Romania

20-May-11 PSV PSV 08 CD

4000 dwt Internal (STX OSV Design)

1 300.0 Farstad Shipping 1H2013 STX Yard in Tomrefjord, Norway (Langsten)

20-May-11 PSV PSV 08 CD

4000 dwt Internal (STX OSV Design)

1 300.0 Farstad Shipping 1H2013 Vietnam

FY11 YTD order wins 2,442.0

NB: We did not include the 8 LPG carriers for Transpetro as the contracts have yet to be made effective, pending financing approval from

Brazil’s Merchant Marine Fund.

Source: STX OSV, DBS Vickers

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DBSV recommendations are based on Absolute Total Return* Rating system, defined as follows:

STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)

BUY (>15% total return over the next 12 months for small caps, >10% for large caps)

HOLD (-10 to +15% total return over the next 12 months for small caps, -10 to +10% for large caps)

FULLY VALUED (negative total return i.e. > -10% over the next 12 months)

SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends DBS Vickers Research is available on the following electronic platforms: DBS Vickers (www.dbsvresearch.com); Thomson (www.thomson.com/financial); Factset (www.factset.com); Reuters (www.rbr.reuters.com); Capital IQ (www.capitaliq.com) and Bloomberg (DBSR GO). For access, please contact your DBSV salesperson. GENERAL DISCLOSURE/DISCLAIMER This report is published by DBS Vickers Research (Singapore) Pte Ltd ("DBSVR"), a direct wholly-owned subsidiary of DBS Vickers Securities (Singapore) Pte Ltd ("DBSVS") and an indirect wholly-owned subsidiary of DBS Vickers Securities Holdings Pte Ltd ("DBSVH"). This report is intended for clients of DBSV Group only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVR. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBSVR, DBSVS, and/or DBSVH) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. DBSVR accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. DBSVH is a wholly-owned subsidiary of DBS Bank Ltd. DBS Bank Ltd along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. DBSVR, DBSVS, DBS Bank Ltd and their associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by DBSVR, DBSVS and/or DBSVH (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk

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COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Vickers Securities (Singapore) Pte Ltd and its subsidiaries has a proprietary position in Jaya Holdings in this report as of 19

May 2011.

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