Sembcorp Marine (SMM SP) - DBS Research 2017-11-13: Potential US$490m Order From Statoil

Sembcorp Marine (SMM SP) - DBS Vickers 2017-11-13: Potential US$490m Order From Statoil 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
    1. two large Compressed Gas Liquid carriers for SeaOne Caribbean valued at S$800m in total;
    2. a semi-submersible production unit for Shell’s Vito at S$400m; and
    3. 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 BUY Maintain BUY 2.300 Same 2.300



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