(BUY, S$10.86, TP S$13.80)
Building up workload for new shipbuilding yard in Brazil. Keppel O&M’s new shipbuilding yard in the state of Santa Catarina in Brazil has secured two vessel newbuild contracts valued at S$140m. The contracts are for six tugboats for SMIT Rebras and one 4,500DWT platform supply vessel (PSV) for Guanabara Navegacao Ltda (GNL), Keppel’s new Brazil ship owning arm. Deliveries are expected from 4Q12 to 2014. The PSV for GNL will be the first under a new build-and-sell/lease model. We do not see major risk in the new business model given that Petrobras requires more than 200 additional vessels in the next ten years to support higher E&P activities. We maintain BUY on Keppel with a SOTP-derived TP of S$13.80. Key catalysts are: (1) continued positive news flow on O&M orders and rising newbuild prices; (2) upside surprises from Petrobras tender for the remaining 21 drillships.
Details of the two newbuild contracts: (1) The first contract was awarded by Rebocadores do Brasil S.A. (SMIT Rebras) for a series of six 45-tonne bollard pull twin-screw Azimuth Stern Drive (ASD) harbour tugboats. The first tugboat will be delivered in 4Q12 and the remaining five units will be delivered at three-month intervals. (2) The second contract involves the construction of a 4,5000DWT Keppel-designed platform supply vessel (PSV) for Keppel’s ship owning arm, Guanabara Navegacao Ltda (GNL). The vessel is expected to be delivered in 2013 and will offered for bareboat charter or sale upon completion.
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