SEMBCORP MARINE LTD
S51.SI
Sembcorp Marine (SMM SP) - Potential US$490m Order From Statoil
- SMM signed LOI with Statoil for a newbuild FPSO.
- Estimated contract value at US$490m.
- Lifts order pipeline to ~S$3bn.
- Reiterate BUY; TP S$2.30.
What’s New
- Sembcorp Marine (SMM) has entered into a LOI with Statoil Petroleum AS (Statoil) for the turnkey EPC of a newbuild FPSO Hull and Living Quarters for the Johan Castberg field development. The potential contract value is estimated at US$490m (or approx S$680m).
What’s the impact?
- LOI raises SMM’s order visibility, lifting order pipeline to ~S$3bn, which could translate to firm orders over the next few months. The other three major contracts highlighted in our previous report include
- two large Compressed Gas Liquid carriers for SeaOne Caribbean valued at S$800m in total;
- a semi-submersible production unit for Shell’s Vito at S$400m; and
- a Gravifloat (SMM’s proprietary technology) modularised LNG exporting terminal for PolyGCL at c.S$1bn.
- Order wins is the leading indicator for shipyards and a key re-rating catalyst during recovery phase. Valuation has high correlation to contract flows. We believe finalisation of these potential orders will drive SMM’s stock price closer to our TP of S$2.30 which is based on 1.8x P/BV, reflecting S$2bn worth of new orders. Stronger contract flows beyond S$2bn could prompt further upgrades.
Recommendation
- Reiterate BUY and TP of S$2.30 on SMM. We continue to like SMM is a pure play to ride the oil price recovery. Rising oil prices, robust new orders and reactivation of Sete’s projects are key re-rating catalysts.
Pei Hwa HO
DBS Vickers
|
http://www.dbsvickers.com/
2017-11-13
DBS Vickers
SGX Stock
Analyst Report
2.300
Same
2.300
