Mermaid Maritime

Mermaid Maritime: its 33.8% associate, Asia Offshore Drilling ("AOD") has signed a drilling contract, whereby AOD's first backup drilling rig AOR-1 will be leased to a reputable client. The charter has been entered into and will be managed by Seadrill, on behalf of AOD. The contract duration is a min of 3 yrs plus a 1 yr option. The potential revenue for the 3 yr period are ~US$197m (US$182k/day) plus a US$39.5m mobilization fee. The rig is currently under construction with Keppel FELS. Delivery is expected in Mar '13, and the rig is scheduled to start operations in Jun '13. CIMB says the subsea contract underscores the division's turnaround, as turnover from the contract alone accounts for 45% of its FY13 subsea sales projection, offering upside to its estimates, possibly leading to a stock rerating. Nevertheless, it remains neutral on the contract overall as Seadrill intends to take over AOD at US$5/sh (vs Mermaid's cost of US$4.73/sh). CIMB keeps its Outperform rating with TP $0.44, says at 0.5c CY13 P/B, Mermaid is trading at near distress levels, and investors could be getting AOD for free.