Noble exercised options ahead of expiry date; raise stake in Indian JV. Sembcorp Marine (SMM)’s client Noble Corp announced that it has exercised options for two JU3000N jackup rigs with a total value of US$490m. The shipyard contract for the two rigs is valued at around US$444m (US$222m each rig). This lifted SMM’s YTD order wins to S$2.63b and accounted for 48% of our FY11 order win forecast. Separately, SMM announced that they have raised their stake in Sembmarine Kakinada (SKL) shipyard in India from 10% to 40% and extended its technical management and services agreement for SKL from five years to ten years. The initial investment of the JV is US$50m. We are positive on the increased shareholding in India as the yard allows the company to be nearer to customers in India and South Asia. Maintain BUY on SMM with an unchanged SOTP-derived TP of S$6.30. Our TP implies 19.5x FY11 P/E.
Noble takes up two new options; SMM has eight outstanding options. The two newbuild rigs will be delivered in 3Q14 and 4Q14. Payment terms for this contract will be 20/20/60. With this new contract, Noble has a total of six jackup rigs being constructed (the first to be delivered in 4Q12) and has secured new options for another two jackup rigs. We estimate that SMM’s clients have outstanding options for eight jackup rigs with a total value of around S$2b. We reiterate our view that most of these options will be taken up given the robust demand for technically advanced rigs. Outstanding order book is now at S$6.3b.
Raising stake in SKL from 10% to 40%. Separately, SMM has exercised its option to increase its shareholding in SKL from 10% to 40%. SKL will be developed over three phases and will be able to offer one-stop solutions for offshore projects by end 2012. We are positive on its JV in India as the yard will be well placed to win projects from customers in India and South Asia.
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