Sembcorp Marine has just secured its seventh drillship contract from Sete
Brasil worth US$806.4m. We believe delays faced by Brazilian yard,
EAS, could lead to more rig contracts for Sembmarine from now till
2013, as a stop-gap measure by Petrobras.
No change to our EPS as the contract
is within our S$10.2bn target for 2012.
Also intact is our target price, still at
15x CY13 P/E, its 10-year average as
well as the offshore & marine’s
mid-cycle valuations. Maintain
Neutral in view of earnings declines
expected in FY13 and rich valuations,
above its 10-year average.
Sembmarine has secured its seventh
drillship contract from Sete Brasil
worth US$806.4m for delivery not
later than 3Q16.
What We Think
We were not entirely surprised by this
order as it is within the US$6bn
orders that Sembmarine is bidding
for (Figure 1). This award has lifted
its YTD wins to S$9.8bn (Petrobras:
S$7.4bn, non-Petrobras: S$2.4bn).
We keep our order target of S$4.5bn
We believe the drillship could be used
by Sete Brasil to compensate for
delivery delays by Brazilian yard, EAS.
To recap, EAS was the first yard to be
awarded seven drillship orders by
Petrobras in 2011 in the national oil
company’s tender of 28 rigs. However,
its brand new facility has been
suffering from teething problems and
could miss its delivery targets of
We expect similar local-content
requirements (about 55%) for this
contract and see the potential for
margin expansion in 2015 as
Sembmarine is expected to
concurrently execute at least three
drillships in Brazil.
What You Should Do
We believe its share price will react
positively to this news
valuations appear rich at 16x CY13
P/E, above its 10-year average of 15x. (Read Report
Source : CIMB Research
Labels: Sembcorp Marine