SINGAPORE (May 22): CGS-CIMB Securities is keeping Sembcorp Marine at “add” with $2.52 target price after it won the Shell Vito semi-sub floating production unit (FPU) contract.
Awarded by Shell Offshore Inc, SembMarine will build and integrate the hull, topsides and living quarters of the unit as well as install Shell-furnished equipment.
Given equipment will be supplied by the owner, CGS-CIMB estimates the contract value to be US$300 million ($402 million), bringing year-to-date order wins to $900 million versus its $3 billion target for FY18 ended Dec.
“We also project an EBIT margin of about 8-9%,” says analyst Lim Siew Khee in a Monday report.
Since Dec 17, SembMarine has secured three large-scale production-related contracts. These include building FPSO hull and living quarters worth US$490 million for Statoil last December; FPSO living quarters for Technip FMC estimated $476 million, and the latest Shell Vito contract at US$300 million-US$350 million. This brings production-related contracts to $1.6 billion in the past six months.
Almost two years without an order following the oil price crash, 13 floating production, storage and offloading vessel orders have been placed since the fourth quarter of 2016, with three awarded in 2018 and another 10 orders possible by the end of the year, according to AccEnergy Maritime Associates (EMA).
“Our target price is based on 2.2 times CY18F book value, its five-year average. Re-rating catalysts include stronger-than-expected orders while downside risks are cost overruns on
projects,” says Lim.
As at 11.43am, shares in SembMarine are up 4 cents at $2.31 or 100 times FY19F core earnings.
