Kreuz Holdings' likely to win only 30% of current tenderbook

But here's its possible ticket to the subsea sector's big league.

According to UOB Kay Hian, Kreuz’s current tenderbook remains at about US$450m-500m, unchanged from three months back. It expects Kreuz to win 20-30% of its current tenderbook. 

Ytd, Kreuz has clinched US$15.5m worth of orders, bringing end-12 orderbook to US$205m.  

Here's more:

Inked deal for game-changing subsea vessel. In Feb 13, Kreuz entered a conditional shipbuilding agreement with a Chinese shipyard to construct a US$113.65m deepwater subsea construction vessel.

The vessel will be equipped with dynamic positioning (DP2), enhanced saturation diving systems and deepwater capabilities.

Expected payback period of seven years. We estimate the new vessel will have a payback period of 7-10 years. As a result, we forecast an additional net profit of US$6m-11m per year, which will lift earnings by 13-23%.

Ticket into the big league. With the new subsea vessel, Kreuz will be able to undertake deepwater work in up to 3,000m of water, from 300m currently.

This will improve Kreuz’s water depth capability to match that of leading subsea contractors such as Ezra, Subsea 7 and Technip. In addition, the vessel will also allow Kreuz to ride on fast-growing deepwater capex, which is expected to more than double from US$347b in 2001-10 to US$873b in 2011-20.

Cost funded by operating cash flows and debt. Kreuz will be required to make three milestone payments of about US$11.4m each (10% of vessel cost) in 2012-14, and the remaining US$79.5m (70% of vessel cost) on delivery.

The milestone payments will be funded by operating cash flow, while the final payment will be funded by debt. 

About 65% of the total vessel cost will be funded by loans with tenure of five years and annual interest rate of about 3.2%.Key Financials Year to 31 Dec (US$m) 2011 2012 2013F