KepCorp

KepCorp: Could see positive sentiment after announcing that it has secured a Semi-Sub Rig worth approximately US$809m from Sete Brasil. The rig is scheduled for delivery in 4Q15, and is primarily intended to support the exploration for Brazil’s offshore reserves, whereby Petrobras has long-term plans for $224 b in capital expenditure from 2011 to 2015.

The US$809m contract value is significantly higher than previous semisubs of around US$600m. However, the price probably reflects its enhanced capability, higher technical and safety requirements in the wake of the Gulf of Mexico spill, and potentially higher construction costs in Brazil.

We note that contract brings Keppel’s YTD orderwins to $9.8b, or US$7.5b and brings grp’s Orderbook to approximately $9.5b. Contract announcement highly positive for Keppel’s share price, given the dearth of new orders in recent mths and we do not rule out that it could potentially spur the beginning of renewed interests in semi-subs going into 2012.

Given that KepCorp’s Orderbook is standing at an all-time high, we note that its yards could be nearing full capacity and 2012 could possibly see SembMarine gaining momentum in orderwins if KepCorp turns down potential orders in wake of overcapacity.
On another note, based on our observation, KepCorp is the Top SGX Stock Pick among different brokerages for FY12, with 8 houses picking the stock as one of their Top Buys for 2012.