Friday, February 24, 2012


SMM: 4Q11 results generally inline.
Net profit of $229m (-4% yoy, +3% qoq) was boosted by a $54m tax write back (allowed deduction on FX losses for prior yrs following amicable settlement of disputed transaction).
Operating margin remained robust at 20.2% and was ~4 ppt higher qoq due to, i) seasonally higher repair contributions, and ii) settlement of variation orders.

The co proposed a final div of 6cts and special div of 14cts. This brings total div for FY11 to 25cts (vs 31cts in FY10 on lower special div), and translates to a yield of 4.8%.

SMM ended 4Q11 with an order backlog of $6.3b, while contract flow has been decent ytd with order wins of $1.3b. Mgt guidance remains upbeat, says customer inquiries have increased a lot in the past three months. Sees strong improvement in enquiry levels, across all asset classes incl across jackups, semisub, drillships and offshore production units. HSBC notes Petrobras order momentum flow now has a high likelihood of continuing, as rigs are typically ordered in a series from builders in order to achieve construction and cost efficiency.
Separately, mgt also highlights strong repair jobs potential (from ballast water installation and approved gas cleaning system installation), as IMO's regulatory rules become mandatory for ships.

Citi estimates capex in FY12-13E to be $700-800m (largely for new Tuas facility and Brazilian yard), to be partially debt funded. When operational in 2013, the new Spore yard will double SMM’s pdtn capacity from 1.9m dvt currently.

Citi, Deutsche, Nomura keep at Buy with TP btwn $5.80 – 6.08.
HSBC maintains Overweight, raises TP to $6.35 from $6.05, affirms stock as an Asia HSBC Super Ten portfolio constituent.
JPM keeps at Overweight, raises TP to $6 from $5.40.
Goldman has a Neutral rating with TP $5.10.

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