Sembcorp Marine - OCBC Investment 2017-09-19: Signs LOI For At Least Two CGL Carriers

SEMBCORP MARINE LTD S51.SI

Sembcorp Marine - Signs LOI For At Least Two CGL Carriers

Sembcorp Marine’s subsidiary, Specialised Shipbuilding Pte Ltd, and SeaOne Caribbean LLC have inked a letter of intent for the design and construction of at least two large Compressed Gas Liquid (CGL) carriers which will be deployed for SeaOne’s Caribbean Fuels Supply Project.

The 366m long, 2 Bcf capacity carriers will have a design that incorporates proprietary ship component ideas from SMM’s subsidiary, LMG Marin. Front-end engineering design studies are in progress.
As prices are also being negotiated, no contract values have been disclosed. However, we think they should cost more than the tug barges that SeaOne in Jun signed with Samsung via a letter of intent, as
1. SMM’s units are carriers, not barges,
2. SMM’s units are more sophisticated than a typical carrier.
Recall that Samsung is slated to build 12 articulated tug barges that will be the first to carry CGL with a total contract value of more than US$1.5b, translating to at least S$170m each.
Maintain BUY with S$1.98 Fair Value Estimate on Sembcorp Marine.

Low Pei Han CFA OCBC Investment | http://www.ocbcresearch.com/ 2017-09-19

OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 1.980 Same 1.980