Sembcorp Marine - CGS-CIMB 2018-05-21: Production Upcycle

Sembcorp Marine - CGS-CIMB 2018-05-21: Production Upcycle SEMBCORP MARINE LTD SGX: S51

Sembcorp Marine - Production Upcycle

  • We expect the latest Shell Vito contract to bring Sembcorp Marine (SMM)’s YTD win to c.S$900m vs. our S$3bn target. The contract award includes installation of Shell-furnished equipment.
  • We estimate the contract to be c.US$300m with a high single-digit margin.
  • With this, SMM will have secured three major production-related contracts in the past six months totalling c.S$1.6bn. We keep our ADD call and target price of S$2.52.

Shell Vito contract in the bag

  • Sembcorp Marine (SMM) has been awarded a contract by Shell Offshore Inc to build and integrate the hull, topsides and living quarters of the Vito semi-submersible floating production unit (FPU). The contract includes installation of Shell-furnished equipment.
  • As equipment will be supplied by the owner, we estimate the contract value to be c.US$300, bringing YTD order wins to c.S$900m. We also project an EBIT margin of about 8-9%.

S$1.6bn production-related contracts in the past 6 months

  • Since Dec 17, SMM has secured three large-scale production-related contracts. These include
    1. FPSO hull and living quarters worth US$490m for Statoil in Dec 17,
    2. FPSO living quarters for Technip FMC (estimated c.S$476m), and
    3. the latest Shell Vito (estimated at US$300m-350m).
  • Energy Maritime Associates (EMA) said that after almost two years without an order following the oil price crash, 13 floating production, storage and offloading vessel orders have been placed since the fourth quarter of 2016, with three awarded in 2018 and another 10 orders possible by the end of the year.

Maintain Add and target price of S$2.52

  • Our target price is based on 2.2x CY18F P/BV, its 5-year average.
  • Re-rating catalysts include stronger-than-expected orders while downside risks are cost overruns on projects.

LIM Siew Khee CGS-CIMB | https://research.itradecimb.com/ 2018-05-21
SGX Stock Analyst Report ADD Maintain ADD 2.520 Same 2.520