Company Name: SEMBCORP MARINE LTD
Research House: DMG
DMG & Partners has upgraded Singapore’s Sembcorp Marine (SCMN.SI), the world’s second largest rig-builder, to buy from neutral and raised its target price to $5.95 from $5.30.
Sembcorp Marine reported on Wednesday a 19.5% fall in fourth quarter earnings to $239.4 million on lower sales.
DMG said Sembcorp Marine’s earnings were above its expectation of $165 million and the street estimate of $140 million, adding that the firm posted higher-than-expected operating margins for 2010.
The brokerage, whose orders forecast for 2011 is $4.5 billion, said that Sembcorp Marine has secured contracts for eight jack-up rigs and options for another 10 rigs since the fourth quarter.
“We believe Sembcorp Marine can achieve our new orders forecast — the 10 newbuild options are worth around US$2 billion ($2.6 billion) and newbuild enquiries are strong,” DMG said in a report.
Sembcorp Marine management indicated the firm had clinched the environmental license needed for its proposed shipyard in Brazil and is still in the running for seven drillship contracts from Brazilian oil company Petrobras, DMG said.
Sembcorp Marine shares closed flat on Wednesday at $5.21.
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