Thursday, November 18, 2010

SembMar - Credit Suisse reiterates Singapore rig builders at Outperform

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD
Research House: Credit Suisse


Credit Suisse keeps Singapore offshore & marine sector at Overweight, notes order momentum for rigs strengthened with contracts, letters of intent for 12 jackup rigs placed for 4Q. 



“We believe that the cyclical recovery in the jackup market could continue going forward as: 1) returns on jackups of 12.3% for recent contracts remain significantly ahead of long-term average returns of 10.9%. 2) financing costs have come down to 5%-6%, and 3) utilisation rates remain close to 100% for high-spec jackups.” 



Expects at least another 7 jackup rig orders over next 2 quarters, likely from Maersk, Transocean, Noble. Tips sector re-rating with recovery in jackup newbuild orders, increasingly positive newsflow on deepwater segment. 

Reiterates Outperform rating on Keppel (BN4.SG) with $12.10 target, Sembcorp Marine (S51.SG), $5.50 target, Sembcorp (U96.SG), $5.80 target. Shares outperforming today, +0.8% at $10.68, +1.0% at $5.01, +1.5% at $4.80 respectively. 

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