Sembcorp Marine upsides too strong to ignore: DBS
It has the potential to score billions from drillship and semi-sub contracts, and a redoubled capacity in ship repair and conversion.
If cards fall in Sembcorp Marine's bidding favor, and the offshore market takes off as expected, then it should quickly ramp up revenues that so far have remained subdued to recognition complications.
Here's more from DBS:
Enquiries still strong. SMM continues to note strong enquiry levels for deepwater rigs and jackups. Indeed, it has secured S$3bn of orders in FY12 YTD, forming 50% of our full year assumption exPetrobras. Order book has grown to S$7.4b, book to bill ratio of 1.5x. It remains a leading contender for six Petrobras drillships worth an estimated US$4.8bn, with at least another 2 FPSO projects from Petrobras, each estimated to be worth >US$500m. When the new yard facility in Tuas is operational in 2013, SMM’s ship repair and conversion capacity will almost double, better positioning it to ride on the current upswing in the offshore market, especially for repair and life extension work for LNG carriers.
SMM is one of the purest O&M plays and a prime beneficiary of the upcycle in semisubs, with potential catalysts from Petrobras contracts.