SembMarine

SembMarine: CIMB maintains Outperform and raises TP to $5.94 from $5.75. Note the
potential for a revaluation of SG rig builders to their previous peak of 22x and apply a mid-cycle 18x (from historical average of 15x) to blended CY12 P/E….

Cite key catalysts to include order strength and a turnaround in Cosco’s earnings, and limited downside if grp loses Petrobras packages. If strip out $6.8bn of order assumptions from Petrobras, earnings would be 14% lower for FY12, and TP would drop to $4.65. (5% downside from current levels). Nevertheless, believe grp stands a chance of winning Petrobras contracts as the final awards are highly dependant on further pricing negotiations…..

Highlight that Non-Petrobras orders should keep yards busy and keep non-Petrobras order Win assumptions of $4bn for 2011, including $2bn of options signed in 2010. Based on enquiries in the market, at least US$2.3b worth of contracts could be in the pipeline in the next qtr, such as Maersk’s two CJ-70 jack-up rig (US$900m), Atwood’s drillship (US$600m) and Transocean’s two premium jack-up rigs (US$840m)….

Similarly, thrust towards deepwater field exploration and development should continue to fuel demand for production floaters and platforms. YTD, SMM has secured about S$1.2bn worth of production platform / FPSO conversion projects with upside potential as this segment could similarly experience a recovery rush like rigs.