• Sembcorp Marine announced that it had won a contract for a WTIV scheduled for delivery in early 2025. We estimate that this contract win is worth approximately S$600m and could be as large as S$800m depending on the specifications.
• Note that this is Sembcorp Marine (SGX:S51)’s first contract win since its announcement of modification work for a Floating Production Storage and Offloading vessel in Brazil in Jun 21.

And So It Begins – Sembcorp Marine’s First Contract in a While

• Sembcorp Marine announced yesterday that it had secured a contract for the construction of a Wind Turbine Installation Vessel (WTIV) based on its in-house design in collaboration with its as-yet-unnamed customer. Delivery of the vessel will be in 2025 with milestone payments. Our channel checks with the industry indicate that the contract value for this WTIV is in the range of S$600m to as much as $800m.
• As a point of comparison, Keppel Corporation (SGX:BN4) won a S$600m order for a WTIV in 4Q20.
• Note that this is Sembcorp Marine’s first contract win since its announcement of modification work for a Floating Production Storage and Offloading vessel in Brazil in Jun 21.

What Is a Wind Turbine Installation Vessel (WTIV)?

• These assets are dedicated vessels for installing wind turbines and can either be designed as floating vessels in the shape of a ship or that of a jack-up. We understand that Sembcorp Marine’s contract involves the latter which is important given that Sembcorp Marine has extensive experience in constructing jack-up-like designs given its history in the offshore marine industry.
• Given their work in the renewable energy sector, the environmental footprint of these vessels is important, with high efficiency and low-carbon emissions essential attributes.

Recent Comments From Sembcorp Marine's Management Give Us Some Confidence That 2022 Will be Strong

• During Sembcorp Marine’s annual results briefing at end-Feb 22, management highlighted that 2022 results will be “significantly better” than 2021. In addition, the persistent labour issues in 4Q21 have been largely solved and thus the company will be able to handle the new order wins that are expected to be announced over the next 6-12 months.
• Note also that Sembcorp Marine had “kitchen-sinked” a high level of provisions in its 2021 results and thus we do not expect 2022 to be materially impacted by impairment losses.

Size of the Global Wind Turbine Installation Vessel (WTIV) Market Is Small But Expected to Grow Significantly

• Globally there are only around 16 industry’s demand.

Maintain BUY Call on Sembcorp Marine

• Maintain BUY general offer at S$0.08/share having lapsed in early-Nov 21, we believe that much of the corporate-level risk has dissipated.
• Catalysts:
  • New orders for rigs, offshore renewable installations or fabrication works as well as repairs and upgrades work for cruise ships and other commercial vessels.
  • Merger or JVs with other shipyards.

Source: UOB Kay Hian Research - 24 Mar 2022