MARKET PULSE: STX OSV, Rig Builders, SembMarine and Swiber (06 Feb 2012)

Stock Name: STXOSV
Company Name: STX OSV HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.65

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: BUY

Target Price: 5.63

Stock Name: Swiber
Company Name: SWIBER HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 0.58

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 12.27

MARKET PULSE: STX OSV, Rig Builders, SembMarine and Swiber

6 Feb 2012

KEY IDEA STX OSV: Premium OSV shipbuilder Summary: STX OSV specializes in the design and construction of complex and highly customized vessels used in the most challenging and difficult offshore environment. Its strong design and manufacturing capabilities, coupled with an advanced level of integration, allows it to stay nimble against the cost competition from Asian shipyards. The group enjoys a natural advantage from its operational headquarters in western Norway, which remains at the forefront of offshore developments for the foreseeable future. Initiate with BUY and a fair value estimate of S$1.65 (based on 9.7x FY12F EPS). (Chia Jiunyang) MORE REPORTS Rig Builders: US to open more than 75% of offshore resources Summary: US President Obama recently declared that he would be directing his administration to open more than 75% of the potential offshore oil and gas resources in the US. US oil and gas drillers have generally outperformed the market in the first year of every 5-year OCS leasing program and during Election years; 2012 will be coincidentally be both. Suppose history repeats itself, Keppel Corporation (KEP) and Sembcorp Marine (SMM) could benefit from the high correlation of their stock prices with that of US drillers. Maintain BUY on both stocks with fair value estimates of S$12.27 and S$5.63 for KEP and SMM, respectively. (Low Pei Han) Sembcorp Marine: News of drillship from Brazil confirmed Summary: Sembcorp Marine (SMM) announced that it has secured a contract worth about US$792.5m from a subsidiary of Sete Brasil for the design and construction of a drillship based on Jurong Shipyard's proprietary Jurong Espadon drillship design. Scheduled for delivery by 2Q15, the ultra-deepwater drillship will cater to the recent oil and gas discoveries in Brazil. Recently there has already been talk of SMM securing a drillship order, as newswires have reported of a potential win. It is possible that this drillship may be one of the seven that were previously awarded to the Estaleiro Atlantico Sul (EAS) shipyard in Feb last year where work has yet to be started. Meanwhile the contract value also falls within our estimates of US$700-800m per unit. Maintain BUYon SMM with S$5.63 fair value estimate. (Low Pei Han) Swiber Holdings: Secures contracts worth over US$200m Summary: Swiber Holdings (Swiber) announced that it has secured contracts worth a total of about US$216m in the beginning of this year for offshore construction projects and vessel chartering services in SE Asia and South Asia, including the deployment of a campaign work barge. Contracts are expected to be completed by 2013. Meanwhile, the group's Middle East JV has won a contract worth over US$38m for vessel chartering services. This represents the group's first entry into the Middle East region after the JV was set up in 2008. Swiber currently has an order book of over US$1b, comparable to Nov last year. As the wins fall within our new order estimates, we leave our earnings estimates unchanged. Maintain HOLD with S$0.58 fair value estimate. (Low Pei Han)

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