SembMarine likely to get a lift this aftn on news that subsidiary Jurong Shipyard has secured US$384 million orders for 2 turnkey jack-up rigs with options for another 4 jack-ups from Seadrill. If options exercised, the total contract value could be worth over US$1b. This contract will be its largest rig order to-date, reflecting the growing market segment for quality premium high spec jack-up rigs.
Indeed, SMM recently announced another rig deal less than 2 weeks ago, with 2 turnkey contracts worth up to US$364m to build 2 jack-up rigs for Atwood Oceanics with options for another 3 rigs. The latest contract is scheduled for delivery in 4Q12 & 1Q13. Industry sources tell us that some ex staff of KepCorp have become free agents & are swinging contracts to SMM.
UBS, which has Buy rating with $5.00 target believes the stock is poised for a near-term share price rally with abundant liquidity & positive order momentum. With 92% of 2011 earnings backed by order book, this could provide further avenues for consensus earnings upgrades. Raises 2011 net profit estimates by 10%. Stock is grossly overbought but a breakout above $2.50 could see it test Feb 2008 peak of $4.73.
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