Odfjell Technology Ltd
NewsWeb Shareholder Disclosure Notification - ODFJELL TECHNOLOGY LTD
In the name and on behalf of FMR LLC, 245 Summer Street, Boston, Massachusetts 02210, United States (the “Investment Manager”), we hereby notify you pursuant to STA Chapter 4, Section 4-1 the following:
On 29 March 2022 the shares and rights to shares in ODFJELL TECHNOLOGY LTD (the “Company”) attributable to the Investment Manager crossed above the threshold of 5%. The threshold was crossed due to trading in the shares on the Oslo Stock Exchange commencing today, 29th of March 2022.
Therefore, the total voting rights deemed to be held is 2,192,734, which represent 5.56% of the voting rights of the Company.
The shares and rights to shares are owned by the funds listed on Schedule A and are managed by the designated management companies which are undertakings controlled by the Investment Manager.
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Første utbytte planlagt Q2 2023.
Opportunity to shine
Following its spin-off from Odfjell Drilling in Q1, Odfjell
Technology is new to the Oslo stock exchange. It brings
more than 40 years of drilling and well service experience
in an asset-light business model with an impressive
earnings track record (also through industry downturns).
Its shares have received limited investor attention and
have had low trading volumes, which we believe explains
the attractive valuation of 2023e EV/EBITDA of 3.0x
(c50% below peers) and cash flow yield to EV of 17%.
We initiate coverage with a BUY and NOK50 target price
based on our SOTP, DCF and peer-group multiples.
Asset light Odfjell Drilling spin-off.
Odfjell Technology was recently spun off from
Odfjell Drilling, comprising the latter’s platform drilling, well services and engineering
businesses. It has an asset-light business model with more than 40 years of experience,
in particular in the North Sea, where it is one of the top platform drilling operators.
Demonstrated earnings capacity.
The company has a demonstrated ability to achieve
solid profitability, even through industry downturns. We estimate Odfjell Technology
reached an ROCE in line with or better than peers since 2011. It has averaged a 15%
EBITDA margin in 2018–2021, and we expect it to maintain this level.
Good cash flow potential.
We believe the company is well positioned to achieve solid
free cash flow near-term as we forecast 17% cash flow yield to EV in 2023 and 20% in
2024, despite the company having recurring capex needs.
Trading at a steep discount to peers.
The shares screen as attractive across valuation
metrics and are trading 55% below our SOTP of NOK54, 47% below peers on 2024e
EV/EBITDA multiples and 44% below peers on 2024e EV/(EBITDA-capex) multiples.
Initiating coverage with a BUY and NOK50 target price. We see support for our
target price using a combination of an EV/EBITDA-based SOTP, DCF and peer-group
multiples. At our target price, the shares would be trading at a 2-year forward
EV/EBITDA of 5x, towards the lower end of peers at 4–9x.