Sembcorp Marine sealed $280m deal from BOT Lease

Its new orders hit S$2.7b.

According to Phillip Securities Research, Sembcorp Marine announced yesterday evening that it has secured a US$220.5mn (about S$280mn) high specification jack-up drilling rig order from BOT Lease, a leasing company of The Bank of Tokyo-Mitsubishi UFJ which is under the umbrella of Mitsubishi UFJ Financial Group.

Here's more:

The rig is scheduled for delivery at end January 2015, and it will be built based on PPL’s own established design Pacific Class 400 series. It is capable of operating deeper waters of 400 feet and drilling depth of 30,000 feet.

Japan Drilling will be the coordinator in the project and will provide the project management team during the rig construction phase.

How do we view this?
The order price of US$220.5mn is 5.8% higher than the last similar order of US$208.5mn per rig made by Mexico-based Oro Negro in March 2013, which could be explained by the exclusion of project management and pre-operations cost.

Nonetheless, we expect good margins on this order, driven by production efficiency and economies of scale. This is the 13th Pacific Class 400 jack-up order for Sembcorp Marine, and it is constructing a series of 7 Pacific Class jack-up drilling rigs in its current order book.

We believe the recent jack-up orders secured at the Singapore yards are indicative that rig owners still prefer established yards over their Chinese peers which lack track record.

YTD, Sembcorp Marine has announced S$2.7bn worth of new orders, which met 58% of our full year expectation of S$4.7bn. In view of this, we are keepingour earnings forecast intact. Albeit we think share price is likely to react positively to the news, we see limited upside to our TP of S$4.42 (still based at 14.0x FY14E P/E).

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