SMM

SMM: Announced slew corporate developments: Agreed to buy SSP Offshore’s business assets for US$21m. The company is a Houston-based company specializing in design, engineering and delivery of innovative floating production and drilling solutions in the O&G industry. Key assets include its flagship SSP Floater technology, and the entire portfolio of proprietary SSP solutions. Separately, SMM will invest in a multi-functional steel fabrication facility which will significantly enhance automation and productivity at its offshore rig building, conversion and production and ship-repair businesses. This will be located at the Integrated Yard @ Tuas, with total investment cost of $222m Meanwhile, SMM updated that construction of the 34.5m ha Phase 2 development of the Integrated Yard @ Tuas has begun. Phase 2 will see building of three new dry docks (2x 150,000 dwt, 1x dedicated offshore dry dock) for offshore rig-building, upgrades and repairs. The three new docks in Phase 2 will allow the group to service a more diverse range of vessels from mid-sized to Suezmax commercial ships, as well as to build offshore exploration and production units. For Phase 2 marine works, the finger pier, quays and wharves which will offer berthage of ~2km will be constructed, and scheduled for completion in 1Q17. Preliminary projection of these construction works is estimated to be $489m. Together with the fabrication facility, total investment is estimated at $711m. These will be funded by the recently announced $600m bond issue under the $2b Multicurrency Multi-Issuer Debt Issuance Programme and through internally generated funds. Goldman Sachs weighs in that despite weaker 1H14 ship repair revenues, expansion of SIY@Tuas Phase 2 is partly driven by 1) anticipation of higher demand for ship repair driven by the new International Maritime Organization, and 2) Phasing out of certain parts of its existing yard facility. Meanwhile, Maybank –KE incorporates interest cost from the bonds and factors in capex, and cuts TP to $3.80 from $4.04, reiterating Hold on muted near term outlook.