O&M: DBS expects sector to post net earnings growth of 23%yoy in 1Q11 with Cosco and SMM to lead growth this quarter. Cosco (Buy TP$3.16) is expected to grow 88% on higher shipbuilding sales and margin recovery. SembMarine’s (Buy TP$6.63) growth is expected to come from high margin projects which will boost EBIT margins to 20% vs 1Q10 margins of 11.7%...
House highlights impressive order wins for offshore yards amounting to $6.2b in 1Q almost meeting 2010 full year wins of $6.3b. Earnings upside is expected to come from higher order wins from KepCorp (Buy TP$14.63) and Cosco, better than expected EBIT margins and faster than expected recognition of projects secured in 4Q10…
Small caps in sector likely to bottom but recovery from new deliveries likely to be capped. Ezion (Buy TP$1.09) is top pick in sub-sector with 2 new liftboats in 1Q11. Other cos covered are SembcorpInd (Buy TP$6.10), YZJ (Buy TP$2.60), CH Offshore (Hold TP$0.60), Swiber (Hold TP$0.83) and Mermaid Maritime (Hold TP$0.46)
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