Keppel Corp/ Sembcorp Marine (SMM): Recent newsflow out of Brazil suggests Sete Brasil’s restructuring may be completed by end-Jun, which will provide clarity on expected earnings from the Brazilian portion of Keppel and SMM’s backlog.
Initial indications are that Sete Brasil will reduce the size of its shipbuilding programme from 29 to around 13-19 vessels. However, the street and CLSA's forecasts have not factored in any order cancellations and thus even a best-case scenario would not lead to any upgrades.
CLSA maintains its SELLs on Keppel (TP: $6.98) and SMM (TP: $1.99) on concern about the lack of new orders.
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