Keppel and Sembcorp to hit record deliveries but leaner new contracts in 2013

Nomura sees volatile yard stock performance.

2012 closed with the Singapore offshore yards securing solid new offshore rig and production vessel orders, well above expectations at the outset of 2012. To-date Keppel has secured SGD9.9bn in new orders (FY11: SGD10bn) and SMM SGD11bn (FY11SGD 3.7bn).

As set out Nomura's 2013 outlook published 23 Nov-2012 titled “Record deliveries but leaner new contract orders”, it expects new orders secured in 2013 to total SGD6.5bn for both yards. "This projected decline is mainly due to lack of chunky multi- billion dollar Petrobras rig orders secured in 2012, but is in fact still a robust new order-flow, and should help sustain earnings into 2015."

Here's from Nomura

Singapore based offshore yards’ (KEP, SMM, SCI) strong stock performance of 2011 was sustained in 2012 on continued new order wins and record high order books. Singapore based offshore yards outperformed the benchmark FSSTI index by 2.9% (up 22.5% vs 19.7% for the index). In contrast, Chinese yards (YZJ, COS) lagged behind in the year, up only 4.3%, underperforming the FSSTI by 15.3%.

With Petrobras orders given out in 2012, the focus in 2013 will return to JU and semi-subs, the staple for Singapore yards. An upturn in commercial shipbuilding coupled with stronger-than-expected margins as yards start booking late-cycle higher-priced orders will be catalysts in our view.

Despite a slowdown in new order activity, we believe there are pockets of opportunity that should continue to witness robust activity and new orders. Encouraged by stubborn oil prices and continuing offshore drilling momentum, we remain bullish on new orders from semi-subs, new product categories such as accommodation semis and also FPSO/FLNG related orders.

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