Sembcorp Marine

Sembcorp Marine (SMM): Nomura spoke with management, who clarified on the market concerns on potential FPSO order cancellations by Petrobras, as per a recent Upstream industry article. Takeaways are: 1) Unlike that suggested in the article, there are no signs from Petrobras that the FPSO integration projects will be cancelled. The module fabrications are now ongoing at SMM’s Estaleiro Jurong Aracruz (EJA) yard in Brazil. 2) EJA has received the required environmental licenses, unlike the suggestion otherwise in the article, and is able to do the FPSO integration works the moment the delayed FPSO hulls are delivered to SMM. Separately, SMM’s newbuild drillship is about to arrive in EJA for final integration works. Nomura reaffirm its pair trade of Buy on Sembcorp Marine (TP $4.63) and Reduce on Keppel Corp (TP: $9.27). House expects SMM to ride on expected drillship orders recovery from 2Q15F.