Sembcorp Marine - RHB Securities 2015-09-01: Lands Another Massive USD1bn Fish.


Lands Another Massive USD1bn Fish.

  • SembMarine announced a USD1bn order win today to construct three topside modules for Maersk Oil for use in the UK sector of the North Sea. 
  • YTD order wins are c.SGD2.8bn, exceeding our conservative USD2.0bn forecast. 
  • We adjust FY15-17F earnings forecasts by 7/3/-12%, now imputing SGD3.3bn order wins expectations for this year, but lower margins for the drillships as we extend their projected construction periods. 
  • Maintain NEUTRAL with an unchanged SGD2.60 TP. 

 Contract to build three big topside modules. 

  • The contract includes the building of a central processing facility, a wellhead platform, the utilities and living quarters platform and two connecting bridges. The facility will be installed in 90m of water at the Culzean field, a high-pressure, high-temperature gas condensate development, in the UK sector of the Central North Sea. Maersk Oil puts the reserves of this field at 250m-300m barrels of oil equivalent (boe). First gas is expected in 2019 (therefore this project will likely be completed in 2018), with a production life of at least 13 years peaking at 60-90k boe/day. 

 Conservative order win forecast exceeded, raising near-term estimates. 

  • This contract takes the company’s YTD order wins to c.SGD2.8bn, exceeding our conservative SGD2.0bn forecast for this year. We raise our FY15F order win forecast to SGD3.3bn, but to be conservative we leave the SGD2.5bn expectations for FY16-17F unchanged. This results in our FY15/16F earnings estimates rising by 7/3%. 

 Lower FY17F estimates as we lengthen drillship construction periods. 

  • We cut FY17F earnings by 12% as we 
    1.  lengthen the construction period for the Sete Brasil and Transocean (RIG US, NR) drillships and 
    2.  impute lower margins on these units for their prolonged time and increased accompanying overhead costs in the yards. 

 Maintain Neutral with an unchanged SGD2.60 TP. 

  • Negative investor sentiment against this pure oil-play SembMarine, who cut its dividend in 2Q15, may keep its valuations under pressure. 
  • We maintain Neutral with an unchanged SGD2.60 TP based on a 12x FY15/16F P/E. 
  • Key risks are operating margins and rig delivery deferments.

Lee Yue Jer CFA | http://www.rhbgroub.com/ RHB Securities 2015-09-01
NEUTRAL Maintain NEUTRAL 2.60 Same 2.60