SMM

SMM: announced two major contracts overnight worth a combined $1.35b - its maiden wins for the year. i) US$1.08b worth of contracts to build two drillships for Transocean, scheduled for delivery in 2Q17 and 1Q18. The deal comes with options for three additional units. ii) Turnkey jack-up rig contract worth US$214.3m from Marco Polo Drilling, the offshore arm of SGX-listed Marco Polo Marine, with delivery scheduled for 4Q15. Comes with an option for two more similar jack-up rigs to be exercised at MPM’s discretion. Pricing of the rigs is marginally higher than recent similar rigs priced at ~US$210m. With the latest orders, SMM has caught up with KEP’s ytd orders announced of $1.1b. Daiwa forecasts a total of $5b worth of new orders for SMM in 2014. Maintains Outperform on SMM with TP $4.70, but prefers KEP (Buy, TP $10.43) for exposure to the rig building sector.