SMM

SMM: OSK hosted 18 fund mgrs and analysts for a shipyard tour to SMM’s Jurong Shipyard and Integrated Tuan New Shipyard. Jurong Shipyard is busy with jackup orders and several upgrade projects. On the other hand, the construction of the New Tuas Yard is progressing well. Notes two drydocks are ready to start repair work in mid-2013, while the construction of drydock No.3 and No.4 are ahead of schedule and will be ready in 2014. Phase One capex is ~$900m, up from its original budget of $750m as some facilities for Phase Two were pushed forward. At the start, SMM will move the repair jobs from Jurong Shipyard to Tuas and Jurong will focus on newbuilds. OSK believes the new yard is well located and is poised to benefit from the opening of the Singapore LNG terminal in mid- 2013 and the relocation of the container port to Tuas over the longer term. With the new drydocks, the biggest in Singapore, SMM will also be able to serve bigger ships like the VLCC and the Triple-E 18k TEU containership ordered by Maersk The house maintains at Buy with SOTP-based TP of $5.70, based on i) shipyard operations at 18x FY12/13F earnings; ii) adjusted for $1.17b cash; and iii) Cosco Shipyard Group at 8x P/E and stake in Cosco Corp at market value