SembMar - SembMarine +4.6%; jack-up rig demand Up-Nomura

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD
Research House: Nomura

Sembcorp Marine (S51.SG) gaps up at opening, last +4.6% at 6-month high of $4.31, as latest US$364 million ($477.1 million) orders from Atwood Oceanics Pacific for 2 jack-up rigs ends company's dry spell of rig contracts, says Dow Jones.



Atwood also has options to buy another 3 rigs, potentially boosting total value of 5 rigs to nearly US$1 billion, largest for SembMarine since 2008 global credit crunch. 

“We are positively surprised by the rig type as we were previously negative on the demand for jack-up newbuilds given the huge backlog of uncontracted newbuilds. We think this reflects the demand for high-specification jack-ups,” says Nomura, which has Buy call with $4.73 target. 

Still, DMG, which has Sell call with $3.73 target, remains cautious; “order books are moving away from the high-margin orders secured in 2007 and 2008, and the annual rate of order replenishment remains substantially below peak levels.” Orderbook quotes suggest miminal upside beyond morning $4.38 high.