SMM

SMM: enters into Phase II of its new integrated yard facility, through the acquisition of a 34.5-ha site at Tuas View South Extension. The site would be leased from JTC for a period of 30 + 30 yrs. Devt is expected to be done in stages and over a period of 4-5 years. Details of the capex plans would be announced later. This is inline with SMM’s plans announced back in Nov ’09 to develop a 206-ha New Yard Facility, over a period of 16 years and in 3 phases. Phase I comprises of 73.3 ha of land and is expected to be fully completed by 2014. Two of the four dry-docks for phase I however would be operational from mid-2013. The initial capex for Phase I was initially estimated at ~$750m but is now likely higher at ~$900m. The new docks have the potential to double SMM’s volume of ship repair and conversion jobs from current levels of ~$650m p.a to $1.1-1.2b p.a in 2014. As ship repair and conversion jobs typically yield higher margins, this could mitigate the potential lower margins from Petrobras-related jobs. Maybank KE maintains Buy with TP $5.60.