Valuation of Deep Sea Supply Plc.

Marius Meyn & Christer Johan Jacobsen

Student thesis: Master thesis


Deep Sea Supply is an international ship owner, operating offshore supply vessels (OSV) in the main global OSV markets. The company was listed on Oslo Stock Exchange in 2006 and has within a short period manifested itself as an important actor in the OSV market. The current fleet consist of 27 vessels located in Brazil, the North Sea, Asia and West Africa, with Brazil standing out as the main area of focus. Recently, Deep Sea Supply established a joint venture with the Brazilian investment bank BTG Pactual, which is part of their ambitious expansion plans. Within 2014 the fleet is expected to grow to 40 vessels. The current global OSV market is characterised by increasing E&P spending as well as an increasing number of oil-rigs entering the market. Based on this the demand for OSV services are expected to strengthen in the years to come, which effectively should increase utilization ratios and freight rates. The growth is estimated to be strongest for large, modern OSVs due to most oil discoveries being made in the deep-water segment. However, the supply of OSVs is expected to increase significantly, especially for the large PSVs, indicating a potential threat of oversupply. Overall, we believe that the OSV market is in a recovery phase after years with poor revenues for the ship owners, and expect that the global OSV market will experience growth in both the AHTS and PSV segment going forward. Deep Sea Supply’s financial performance in recent years has been marked by volatile markets triggered by the financial crisis and an oversupply of OSVs, which effectively has increased the company’s liquidity risk. However, we argue that the performance of Deep Sea Supply is expected to improve as the company is well positioned to exploit the positive market sentiment going forward. Through the DCF and EVA models we estimated the fundamental market value of equity per 31th of May 2013 to be USD 344.5m, which represents a share price of NOK 15.9. This indicates an upside of 70% when comparing to the current share price of NOK 9.35 per 31th of May. Hence, we recommend a strong buy on Deep Sea Supply.

EducationsMSc in International Business, (Graduate Programme) Final Thesis
Publication date2013
Number of pages184