SBM Offshore is an offshore company in the energy sector mainly delivering FPSO (Floating Production Storage and Offloading) technology to the oil industry, to produce around 2 million barrels per day.
Priced at €14 SBM returns 8.5% cash yield to shareholders. The company has a $30B backlog with signed contracts providing good insight in future cash-flow. I expect €2.5 EPS for the coming years as the Lease and Operate business continues to grow. The Debt/Equity ratio is potentially a concern although debt payments are covered by long-term contracts with top-tier clients and debt is 50% non-recourse.
The investment has room to grow from current 6x expected earnings for 2024 as the market gains confidence in the business model (potentially towards 8x €3 EPS).