Thursday, June 28, 2012


SMM is +2.2% at $4.67, extending Wednesday's 3.9% gain, outperforming peer KEP's 1.2% rise to $10.31. OCBC notes SMM has underperformed KEP since late Feb, with risk-off sentiment affecting higher-beta SMM more. Notes SMM's 1Q12 earnings disappointed and a recovery in property-stock sentiment (KEP has a property arm), but it expects the trend to reverse in coming months, now favoring SMM. While further market volatility may affect SMM more, it views the stock's recent selldown as unwarranted. Keeps a positive view on the premium offshore rig market, expecting SMM to catch up on orders and to see a 2H12 earnings pickup. Views SMM's "speculative builds" as better-termed opportunistic, noting they have been taken up so far and generally command higher prices on earlier delivery dates. Raises SMM's TP to $5.71 from $5.13 after rolling over to FY12-13 blended core earnings, keeping a Buy call. June 21's $4.73 peak may offer a near-term cap.

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