Keppel Corp: announced that it has entered into a Letter of Intent (LOI) with returning customer and 31.7% associated co Floatel Int’l, to build an accommodation semisub worth US$315m for delivery in Jul ’14. This will be Floatel’s 4th accom semi with KEP after the delivery of 2 previous semis in 2010, and comes at a higher price tag than the US$260m order for the Floatel Victory in 2011. The premium for the latest order is likely bcs it is for a new generation harsh environment design.
Ytd, KEP has won 2 orders worth US$465m. This compares with its order book at end Dec ’11 of $9.4b. The strong order flow from the rig builders is testament to the buoyant demand for ultra-deep water (UDW) rigs, as highlighted by yday Citi and Deutsche (see yday’s 9.03am and 9.06am post respectively). This is further reinforced by Morgan Stanley’s view of a “super spike”, in which it sees rental rates for UDW rigs climbing 28% to a record US$714k/day by 3Q12.
KEP trades at 10.9x P/E. The Street has 22 Buys, 3 Holds and 1 Sell rating on the stock, with consensus avg TP of $12.20.
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