Kim Eng on 17 Feb 2012
Sembcorp Marine (SMM SP) – Secures new jack-up contract for US$213m
Previous day closing price: $5.28
Recommendation – Buy (maintained)
Target price – $5.58 (maintained)
Sembcorp Marine (SMM) has announced a new order worth US$213m. It will construct a Pacific Class 400 jack-up rig for customer Safin Gulf. The rig is due for delivery in November, which is a relatively short time of less than a year, whereas a jack-up built from scratch takes around two years. We suspect that the rig may have been pre-built by SMM, hence the faster lead time and a significant premium pricing. Previously, the same class of rig sold for US$192m.
We will get further updates from the company. As it stands, the contract win itself is positive for SMM, and the news should propel its share price even higher. We maintain our Buy recommendation and target price of $5.58.
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