SMM: may outperform relative to KEP today, after announcing a contract worth US$291.6m to build an accomodation semi-sub rig for Prosafe. The vessel will be delivered in 2Q14. The contract comes with options for two more units.
The semi-sub has a capacity for 450 persons and will be equipped with DP3 systems, to work in harsh environments alongside various fixed and floating platforms. Such rigs are used to provide additional living quarters for offshore personnel, primarily during hook-up and commissioning in the development phase, as well as for maintenance and upgrading during the production phase.
This contract brings YTD orderwins for SMM to $3.7b, compared to KEP’s $8.4b as at end 3Q. SMM appears to have followed KEP’s footsteps with regards to customer payment terms, ie. 20% initial deposit and 80% payment on delivery. This may have helped SMM secure a new customer in Prosafe.
The stock trades at 10.3x P/E.
DMG reiterates Buy with TP $5.16.
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