Company Name: SEMBCORP MARINE LTD
| Research House: Daiwa | Price Call: BUY | Target Price: 5.58 |
SembMarine’s acquisition of 70% of unlisted SLP Engineering for GBP2.5 million ($4.98 million) is an opportunistic way to target the North Sea market, Daiwa says.
While it is difficult to find a suitable comparison due to SLP’s size and highly specialized market segment, the house believes the pricing of 5.1x 2012 PBR is fair, primarily as the seller was distressed.
It notes SLP has extensive experience in projects that can withstand the North Sea’s harsh operating environment, with the segment’s highly specialized and technical nature creating high barriers to entry for SembMarine’s Chinese competition.
“The SLP acquisition will benefit SembMarine as it will open up areas where Keppel does not have a strong presence. Among Keppel’s contract wins, we have yet to see North Sea-related projects.”
It keeps SembMarine at Outperform with $5.58 target. The stock is up 0.6% at $5.11.
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