DBS Equity Research: Wired Daily 11 Jan 2016

kiasutrader

Publish date: Mon, 11 Jan 2016, 01:54 PM

Sete Brasil on the verge of chapter 11 filing. Singapore rigbuilders are likely to make revenue reversals and impairments.

According to a Bloomberg article, Grupo BTG Pactual and other investors of Sete Brasil Participacoes SA (Sete Brasil) will meet on 21 Jan and decide whether Sete Brasil will file for bankruptcy protection after oil prices collapsed and it was cited in a sprawling corruption scandal. Keppel Corp (Keppel) and Sembcorp Marine (SMM) secured orders for six semi-submersibles and seven drillships respectively from Sete Brasil totalling S$6.2bn and S$7.0bn respectively in 2011/2012. Keppel has recognised revenue of approx. S$2.0bn for the three out of six semi-submersibles, implying S$4.2bn outstanding orderbook for Sete Brasil projects. SMM has recognised revenue of approx. S$2.5bn for the four out of seven drillships, implying S$4.5bn outstanding orderbook for Sete Brasil projects. These represents c.38% of their outstanding orderbooks as of end Sept-15 [Keppel: S$11.0bn; SMM S$11.6bn]. If Sete Brasil were to file for chapter 11, Singapore rigbuilders are likely to make revenue reversals and impairments. We reiterate our bearish stance on rigbuilders.

Olam Internationalhas acquired Amber Foods Limited, which owns the wheat milling and pasta manufacturing assets of the BUA Group in Nigeria, for a total enterprise value of US$275m. This transaction will to double Olam's wheat milling capacity and make it a leading pasta player in Nigeria. To be funded through a combination of debt and internal accruals, the acquisition is expected to be earnings accretive from the first year after consolidation. Olam expects the acquired business to generate an EBITDA to Invested Capital return of 13-16% when it reaches steadystate in 2018.

Pacific Andessaid it has received a letter from HSBC, as trustee of the S$200m 8.5% bonds due 2017, alleging that the company is in breach of certain of its obligations under the terms and conditions of the bonds. Its stock has been under voluntary suspension since November 28, 2015, and will remain suspended until further notice.

Otto Marine has entered into a Memorandum of Understanding (MOU) with a world-renowned Port Operator to explore the potential development of a Fabrication and Marine Facility. The partnership will enhance Otto Marine's Batam yard facility and is expected to be operational by July 2017. Strategically located, the supply base is in close proximity to Singapore and will provide an avenue to tap on the robust Indonesian oil and gas industry as well as leverage on cabotage opportunities.

PACC Offshore Services Holdings (POSH) has entered into a joint venture (JV) and incorporated "POSH Saudi Company" with Saudi Arabia's Hmood Al-Khalaf Group as part of its plans to expand its presence in the Middle East. POSH Saudi Company is majority owned by POSH.

After more than 12 years of forcing companies to release corporate results every three months, the Singapore Exchange (SGX) may be relooking the controversial practice of quarterly reporting. The Business Times has learned that SGX could be reviewing quarterly reporting in the wake of recent moves to scrap the requirement in other major financial markets such as the United Kingdom and Europe.

Source: DBS

Keppel Corp (BN4)Sembcorp Marine (S51)Olam Intl (O32)Pacific Andes (P11)

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