The acquisition of Scott and English (S&E) by Swissco is in fact an injection of assets by owner Kim Seng Holdings (KSH) into Swissco. The new entity allows KSH to tap on public markets as a source of funding to scale up rig count. We expect aggressive expansion from the combined entity: the true story of Swissco could well lie beyond FY15.

Our target price of S$1.44 is based on 9x FY16 P/E, a 29% premium over the P/E of Singapore OSV owners. We derive our FY16 EPS by factoring in a likely expansion of eleven rigs (four from JV, seven 100%-owned) by FY16, based on US$60m capex and US$8m profit per rig. That said, we think that some fundraising is needed to ensure an ample cash balance. We initiate coverage with an Add call.