O&M

O&M: CS maintains O/W on sector. Note that govt’s emphasis on raising productivity of SG’s manufacturing industry has been heightened post the recent GE. Expect population growth to slow to 1-2%, as the govt reduces dependence on foreign workers and tip progressive hikes in foreign worker levy to have minimal impact of around 10 bp on margins…..

In tandem, yard productivity gains may outweigh potential labour costs rise. Add that Labour cost is the key competitive strength of Spore yards, with wage cost per employee 40% that of Korean yards, offset by lower productivity in SG yards, with rev per employee being 32% of Korean yards. Believe ombination of strong order in near term and optionality of expanding into new business segments put SG yards in sweet spot. Reiterate O/p on KepCorp (TP $14.60) and SembMarine ($6.60).