What a difference a week makes. Last week, we reported onM&A speculation driving the positive price action of Offshore & Marine stocks. Within the week, these stocks have taken a more fundamental tack, with market optimism for a resumption of rig orders driving up shareprices sharply. The major blue-chip outperformer has been Sembcorp Marine (SMM), whose price rose by24% over the past month. Recently, Upstream reported that SMM had secured a drillship order from SeteBrasil. Previously, we noted that Sete was poised to become a major factor in the handling of contracts forPetrobras. To recap, Sete Brasil was established in May 2011 with the mandate to build deep-water rigs forPetrobras' offshore exploration requirements. Its main stakeholders are Brazilian banks and pension funds,which also allows it to access financing. Petrobras itself has less than a 10% stake. Sete in one fell swooptakes the financial burden off Petrobras, as well as provides political cover. Keppel Corp was the firstbeneficiary of Sete’s mandate, with the clinching of a US$809m semisubmersible newbuild contract inDecember. Back then, we pointed out that this was indicative of more to come for the Singapore yards.While yet to be officially confirmed by SMM, we estimate the drillship order could be worth US$650-700m toSMM. Upstream also reported that Sete is on the cusp of awarding a slew of new contracts, and thatPetrobras may be looking for up to 36 new rigs – the value of these alone could be collectively worth morethan US$25bn. The future is looking rosy indeed. Separately, Cosco Corp has also advanced steadily onmarket speculation that it may secure new offshore orders as well. We, however, are less sanguine. The firstline of new orders is likely to go to established offshore yards such as Keppel and SMM. Furthermore, anyjobs that Cosco take on will continue to come at the expense of margins, due to learning curve issues. Insummary - stick to the experts. Keppel has been a relative laggard to SMM, and is our top pick.
Keppel Corp (KEP SP, $10.61)
Key levelsResistance 2: $11.35Resistance 1: $11.00Support 1: $10.00Support 2: $9.55
Keppel Corp is now overextended and a shortpullback would be healthy. The counter remainstechnically sound holding above the 100- and 200-dayEMA, suggesting the bulls are in control. Theimmediate support level of around $10.00 shouldattract buyers in the event of a pullback.
Key levelsResistance 2: $11.35Resistance 1: $11.00Support 1: $10.00Support 2: $9.55
Keppel Corp is now overextended and a shortpullback would be healthy. The counter remainstechnically sound holding above the 100- and 200-dayEMA, suggesting the bulls are in control. Theimmediate support level of around $10.00 shouldattract buyers in the event of a pullback.
SembCorp Marine (SMM SP, $4.78)
Key levelsResistance 2: $5.15Resistance 1: $4.75Support 1: $4.50Support 2: $4.00/10
The counter has moved up aggressively over the pastfew weeks. Technical indicators are extremelyoverbought and the counter may need some time torest before another sustainable breakup. The supportarea at around $4.50 would be able to hold on anyweakness. Key levelsResistance 2: $5.15Resistance 1: $4.75Support 1: $4.50Support 2: $4.00/10
No comments:
Post a Comment