With the positive sentiment on oil and gas stocks recently, Sembcorp Marine (SMM) has been a key beneficiary, rising by about 17.8% YTD compared to the FTSE Oil and Gas index’s 8.3% and the STI’s 5.5% gain. And during a period of bullishness on the sector, we further expect the stock to outperform its closest peer, Keppel Corporation. Meanwhile, we are also optimistic about SMM’s new order pipeline across a range of assets; the group is tendering for various work which may include construction of the world’s largest jack-up. Maintain BUY with S$5.63 fair value estimate.
Key beneficiary from positive sentiment. With the positive sentiment on oil and gas stocks recently, Sembcorp Marine (SMM) has been a key beneficiary, rising by about 17.8% YTD compared to the FTSE Oil and Gas index’s 8.3% and the STI’s 5.5% gain. During a period of bullishness on oil and gas plays, SMM’s stock is likely to outperform its closest peer, Keppel Corporation (KEP) as 1) SMM only has offshore marine operations while KEP also has property and infrastructure arms, and 2) SMM is likely to be able to take in more rig orders for earlier delivery compared to KEP due to higher yard capacity – recall KEP secured new orders totaling S$10b with deliveries extending to 2015 last year while SMM clinched work worth about S$4b last year.
Tendering for new orders – may build largest jack-up yet? According to Upstream , Jurong Shipyard is one of three bidders who submitted offers early this year to Petrobras for the conversion of four FPSO units which will be used in the Santos basin in Brazil. Jurong is also one of four yards expected to tender for the construction of up to four super-sized jack-ups for Statoil in May . Coined as Category J rigs, they will be used for development drilling in the North Sea. According to market talk, the Gusto MSC CJ80 is likely to be the rig design – recall that the CJ70 is the largest jack-up built to date. Sembcorp Marine secured a CJ70 jack-up rig order from Seadrill in Mar last year for US$450m while Keppel Corp won an order for two similar units from Maersk in Feb last year for US$1b, giving a rough idea of the quantum of the Cat-J programme.
Optimistic about order pipeline. Our new order win assumption for SMM this year is S$4b (excluding Petrobras rig orders), and we are optimistic on the orderflow across a range of assets (jack-ups, semi-subs and production platforms; drillships to depend on Petrobras). Maintain BUY with S$5.63 fair value estimate.
Tendering for new orders – may build largest jack-up yet? According to Upstream , Jurong Shipyard is one of three bidders who submitted offers early this year to Petrobras for the conversion of four FPSO units which will be used in the Santos basin in Brazil. Jurong is also one of four yards expected to tender for the construction of up to four super-sized jack-ups for Statoil in May . Coined as Category J rigs, they will be used for development drilling in the North Sea. According to market talk, the Gusto MSC CJ80 is likely to be the rig design – recall that the CJ70 is the largest jack-up built to date. Sembcorp Marine secured a CJ70 jack-up rig order from Seadrill in Mar last year for US$450m while Keppel Corp won an order for two similar units from Maersk in Feb last year for US$1b, giving a rough idea of the quantum of the Cat-J programme.
Optimistic about order pipeline. Our new order win assumption for SMM this year is S$4b (excluding Petrobras rig orders), and we are optimistic on the orderflow across a range of assets (jack-ups, semi-subs and production platforms; drillships to depend on Petrobras). Maintain BUY with S$5.63 fair value estimate.
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