OUTPERFORM Maintained
S$5.20 Target: S$6.80
Mkt.Cap: S$10,842m/US$8,905m
S$600m contract from PTTEP
Sembmarine’s order drought is finally over, following a S$600m contract from PTTEP International, Yangon. The contract is for the construction and hook-up/commissioning of an integrated processing and living-quarters platform. This could mark the end of the order drought for Sembmarine after a quiet 2Q11 as its order wins climb to S$2.1bn (42% of our S$5bn target) with unexercised options of about S$2bn. Enquiries and the order pipeline for production platforms are strong including a potential US$1bn contract from PTTEP where SMOE is a frontrunner together with joint bidder, Saipem. Other near-term contracts could include two semi-sub orders from Songa for Statoil (estimated at US$1bn), which could be awarded to Sembmarine by end-2011. No change to our earnings estimates or target price of S$6.80, based on 18x CY12 P/E, at the upper end of its previous trading cycle. Stock catalysts are still expected from stronger-than-expected new orders , margins and upside from Petrobras wins.
The news
SMM has secured a S$600m contract for the construction and hookup/commissioning of an integrated processing and living-quarters platform for PTTEP International, Yangon. Work will begin in Oct 11 with completion in Nov 13. The new platform features a 15,000-metric-tonne topside integrated with a 128-men livingquarters module to be installed at a water depth of 150 metres in Block M9, Andaman Sea, offshore Myanmar.
Comments
Catching up. This could mark the end of the order drought for SMM after a quiet 2Q11 with the last rig contract (US$428m) secured in March from Noble. YTD orders have reached S$2.1bn (42% of our S$5bn target) with options for eight jack-up rigs worth about S$2bn.
There are more. Enquiries for platforms remain high in the market and the current platform contract is in addition to a US$1bn topside PTTEP contract which SMM is still in the running for with Saipem (refer to our report dated 3 May 11). Statoil has also indicated that it is likely to contract up to six Cat-D semi-subs in the next 12 months after ordering the first four rigs from Songa Offshore recently (to be built by Daewoo Shipbuilding at US$565m per rig). We believe the remaining two (estimated at US$1bn in total) could be awarded to Sembmarine by end-2011 as it is one of the qualifying yards against DSME.
Still hopeful on Brazil. Although Petrobras’s capex plans for its remaining 21 drillships have changed from pure ownership to chartering from drilling contractors, their local-content requirement is unchanged and SMM remains one of the final bidders along with Keppel Corp. We continue to expect an award of these drillships by end-2011/early 2012.
Valuation and recommendation:
Maintain Outperform and target price of S$6.80, still based on 18x CY12 P/E, at the upper end of its previous trading cycle. Stock catalysts are still expected from stronger-than-expected new orders, margins and upside from Petrobras wins.
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