Keppel Corp

Keppel Corp: wins 8th semi-sub drilling tender from Seadrill worth US$142m. Delivery is scheduled for 2Q13. YTD orders secured amount to ~S$6.6b.
While the order wins is positive, and underscores the strong order momentum from the O&M sector, we highlight that pricing for this latest semi-sub is low, compared to a similar orders priced at btwn US$160-200m just not too long ago.
Still, the majority of Street has Buy ratings with recent TP ranging btwn $12.70- 14.37.

Rigbuilders: Upstream says Petrobras expects 28 locally built drilling rigs to be delivered on time (target 2015) despite delays in the bidding last yr. This may somewhat quell previous concerns that Petrobras may cancel/ delay some of the rigs due to the high cost. Still, unless the orders are finalized, things may still change, in view of Petrobras’ character...

On the back of this, Deutsche notes that industry demand is healthy and appears to be coming from across the industry globally. Maintains Overweight view on the O&M sector and believes KEP and SMM should benefit from any upgrade and/or replacement opportunities with increased scrutiny of aged offshore assets, as well as greater demand for high spec offshore rigs as drill conditions become more challenging and safety standards rise.