Previous day closing price: $5.20
Recommendation – BUY (maintained)
Target price: $6.66 (maintained)
Sembcorp Marine’s (SMM) SMOE subsidiary has secured an offshore contract worth close to S$600m for the construction of an integrated processing and living quarters platform. The customer is a Myanmar subsidiary of Thailand’s PTTEP. SMOE will carry out the engineering, procurement, construction, transportation, installation, hook-up and commissioning of the unit in the Andaman Sea, offshore Myanmar, at a water depth of 150m. Some of the features of the module include processing modules and accommodation for up to 118 personnel. Construction will commence in October this year and completion, including installation, should take place by November 2013.
While SMM’s bread-and-butter rig-building market has been relatively quiet over the past two months in the current economic climate, the company continues to engage customers, resulting in specialised high-value contracts such as this. This latest contract win is broadly within our assumptions for SMOE, and we are not changing our forecasts at this time. SMM’s total orderbook stands at an estimated US$4.5b. We also believe that it is a matter of time before the rig-building cycle resumes to encompass not only the jackup market but the floaters as well, including drillships and floating production units.
We maintain our BUY recommendation on SMM and target price of $6.66.
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