Towards Financial Freedom
Sembcorp Marine - Secures USD220m Jackup Contract
Sembcorp Marine (SMM)'s PPL Shipyard has secured a contract from BOT Lease to build a Pacific Class 400 jackup rig for USD220.5m. We estimate that the new contract will lift its YTD order wins to SGD2.71bn, which is within our SGD4bn estimate, and net order book to SGD14.7bn. We make no changes to our earnings estimates and maintain a NEUTRAL recommendation on the stock.
- USD220.5m newbuild contract from BOTL. SMM's 85%-owned PPL Shipyard has secured a jackup contract for USD220.5m (SGD278m) from BOT Lease Co Ltd (BOTL), a leasing unit of The Bank of Tokyo- Mitsubishi UFJ (8315:JP, NR). The Pacific Class 400 design rig is scheduled to be delivered in Jan 2015. Japan Drilling Co (1606:JP, NR) is the coordinator of the project and will manage it during the construction period.
- Price point is positive. We view the latest contract win positively as the price for the Pacific Class 400 design jackup rig is nearly 6% higher than the selling price to Oro Negro in March. As this is a repeat design but at a higher price, margins will also be higher.
- More jackup orders due to on-going fleet renewal cycle. SMM's YTD order win of SGD2.71bn accounts for 68% of our FY13 order win forecast. We estimate its net order book is now at around SGD14.7bn. We expect more jackup orders in 2013 as the fleet renewal cycle is still intact and fewer orders were placed in 2012.
- Maintain Neutral, TP SGD4.65. We value SMM based on a sum-of-theparts (SOTP) valuation, with its shipyard business at 16x FY13 NOPAT. SMM is now trading at 16.3x FY13F P/E and 14.5x FY14F P/E. Key risks to our call are higher-than-expected new orders and productivity gains.
Source: OSK
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