O&M

O&M: Delivery deferments rising
Maybank KE reiterated its Sell rating on the rigbuilders with the rising delivery deferments.

Transocean has delayed its five jackup rigs under construction by Keppel again. The US$1.1b contract was inked in Nov '13 for initial deliveries over 1Q16-3Q17 and included options for five more units.

Following two deferments previously, the latest will push rig delivery dates from '18 to '20.

The house believes that not much work has started on the rigs and thus no significant working capital is being locked up in those rigs yet. Initial estimated impact on its FY17-18 EPS forecasts for Keppel is about -6%.

Notably, the development essentially implies that the industry may not see a meaningful recovery in rig orders until 2018, supporting Maybank KE's negative view on the rigbuilders.

Between the two names, downside risk to Maybank KE's TP is more significant for Sembcorp Marine (TP $1.00) at 40%, followed by Keppel (TP $4.24) at 23%.