Seatrium Limited (formerly SembCorp Marine and KOM)

Surpassing $5.00. (Not Vested)

Business Times - 07 Feb 2012

SembMarine bags US$792.5m contract in Brazil

Deal to build drillship paves way for more from Sete Brasil; opens wider market for SembMarine

By LYNN KAN

SEMBCORP Marine bagged a US$792.5 million contract from Sete Brasil to build a drillship, setting the stage for more units to come from the Petrobras-backed rig-owner.

Said Wong Weng Sun, president and CEO of SembMarine: 'We believe this order will be the first of many orders in Sete Brasil's ambitious drillship expansion programme to develop the giant Brazilian pre-oil fields.'

Market talk has had it that Brazilian state oil company Petrobras has already approved a 21-rig tender to Sete Brasil. Therefore, deepwater rigs and drillship construction contracts are expected to be awarded in the coming months.

The construction will be based on Jurong Shipyard's proprietary 'Jurong Espadon' drillship design. Mr Wong said the order represents 'the first drillship that our group is building for Brazil'.

It will also be the first project to be built at the Singaporean rigbuilder's new Brazilian yard Estaleiro Jurong Aracruz.

The drillship will be delivered no later than the second quarter of 2015.

Analysts foresee this drillship unit heralds more similar orders to come.

'We believe this is in addition to the six drillship bids that (SembMarine) submitted in 2011,' said CIMB analyst Lim Siew Khee.

The contract 'positions (SembMarine) very well to penetrate beyond its earlier target of 6-7 drillships ... since Estaleiro Atlantico Sul - a local yard - is behind schedule in delivery.

SembMarine may potentially take over a portion of its seven-drillship contract', said Citi analysts in a report.

SembMarine's drillship contract value is believed to be about 30 per cent higher than those built by Samsung Heavy Industries, and would address the higher costs of building in Brazil, said Jason Saw of DMG & Partners.

Added Kay Lim, head of securities research at DNB: 'We expect the higher pricing to mitigate the higher construction risks in Brazil and expect the project to be profitable.'

Sete Brasil's approval of SembMarine's design is also a 'breakaway' from the Korean shipbuilders, 'whose designs have dominated market share over the past cycle', noted Citi analysts.

'Acceptance of this rig will also improve SembMarine's marketability to international drillers and widen its market,' said Citi.

With more clarity on Petrobras-related drillship orders, CIMB thinks SembMarine's order wins will be in the range of US$8 billion rather than the US$6 billion it projected earlier.

SembMarine jumped 11 cents in yesterday's trading session to end at $4.96.

http://info.sgx.com/webcorannc.nsf/Annou...endocument

A rig accident at Jurong Shipyard this morning caused a jackup rig to be tilted to one side.

There was no fatalities. A total of 90 workers were sent to various hospitals for follow-up observations, without the assistance from SCDF. Imho, this is a sign of a well organised company which can respond to emergency efficiently.

According to wanbao, the rig is due for delivery at the end of this month.
Both SembMarine and Semb Corp drop 10 cents today. From the price chart, the share price started dropping around 11.25am. Seems like someone in the vicinity of the accident call his broker instead.

any reason why the stock price is trending downwards? prospects are so bright, market leader and orders are pouring in. while margins are a squeezed right now, clients seem to be queuing up with rig orders.

(03-04-2013, 03:27 PM)mulyc Wrote: any reason why the stock price is trending downwards? prospects are so bright, market leader and orders are pouring in. while margins are a squeezed right now, clients seem to be queuing up with rig orders.

inflation worries over brazil.

Sembcorp Marine: More prudent on margins
Sembcorp Marine (SMM) is currently building a 82.5ha yard
in Brazil to undertake drillship construction, amongst
others. Should inflation in Brazil continue to be unrelenting,
SMM may face further margin pressures from labour costs,
especially since there is already a shortage of skilled labour
in the country. Over the longer term, however, we believe
that SMM’s foray into the drillship business puts it in good
stead to secure more drillship orders, diversifying its
product range. In the shorter term, however, we prefer to
be more prudent on the group’s operating margin
assumptions, and lower these to 12.1% and 12.3% for
FY13F and FY14, respectively (2012: 12.5%). As such, our
SOTP-based fair value estimate slips from S$5.84 to
S$5.64. Maintain BUY.

Estaleiro Jurong Aracruz (The Brazil Shipyard) will only start operations by end 2014, based on previous Mgt guidance. It is hard to imagine FY13/14 margins will be highly impacted by this.

- OPM has been on a upward trend since 2006 (6.4%), climaxing at 2010 (20.7%). SCM operating/net margins are dependent on REPEAT orders. Exceptional years 2009/10/11 have been characterized with delivering of repeat orders - 2008 (8 Pacific class 375 rigs), 2009 (5 Pacific class 375 rigs, 2 F&G Ex-D semi, 2 ultra deepwater semi), 2010 (4 Pacific class 375 rigs, 3 F&G Ex-D semi, 1 Moss Maritime semi) and 2011 (2 Pacific class 375 rigs, 3 F&G Ex-D semi, 1 Moss Maritime semi)

- In 2012, margins continued to suffer as it only built 1 repeat order (a F&G Ex-D semi), while working on delivering the Pacific Class 400 design rig. This new design rig also seemed to suffer from lower asking prices due to competition.

- 2013/14 are envisioned to be impacted due to new design rigs and less repeat orders for the flagship Pacific Class design.

- Moving on, in order to increase margins, SCM needs to break into the harsh environment rigs market and also get more repeat orders for the Pacific Class design 400 rigs. With the announcement of Daewoo shipping getting into the harsh environment rig market and pressure coming from chinese shipyards on the low spec rigs like Pacific Class 400, it is not a given.

- From how the order books look now, Estaleiro Jurong Aracruz will be critical to executing the current 7 drillship ships and 2 FPSO repeat orders. With all the known problems with operating in Brazil and SCM been a relatively new player (compared to Keppel Fels), there is alot of uncertainty.

(vested)

It feels as though the market is thoroughly discounting the fact that they have a current net orderbook of > $12 billion with a chunk of it not even recognized as revenue yet (probably in 2013/14)

Vested.

(04-04-2013, 09:25 AM)mulyc Wrote: It feels as though the market is thoroughly discounting the fact that they have a current net orderbook of > $12 billion with a chunk of it not even recognized as revenue yet (probably in 2013/14)

Vested.

sometimes, its takes time before pple take notice.

not vested in sembmarine but in its downstream steel suppliers. if sm huat, these steel stocklists shd follow suit.

impt to stay invested.

(04-04-2013, 09:25 AM)mulyc Wrote: It feels as though the market is thoroughly discounting the fact that they have a current net orderbook of > $12 billion with a chunk of it not even recognized as revenue yet (probably in 2013/14)

Vested.

In 2013/14, ~5billion of existing orders would be delivered. Out of these orders, there is 1.2bil worth of Pacific Class 400 jack-ups and 1.2bil worth of F&G JU3000N semis (turnkey), which should start to command higher margins than FY2012. But i guess Mr Market is discounting higher costs due to the startup at TuasView Ext Phase1 (operational ready by 2H2013) and Estaleiro Jurong Aracruz (operating by end 2014).

SCM has spent close to 1bil sgd of CAPEX over the last 2 years. There is still about 500mil more to go over the next 2 years. Looking at the cycle of 'orders-->rising profits-->repeated orders-->rising dividends--> new CAPEX', IMHO, i feel it is currently at a stage where it is still going downwards to the trough. This might explain why the share price is trending downwards.

As forumer paullow mentioned, sometimes it takes time and patience (and some ignorance on market prices)...

(08-04-2013, 08:46 PM)weijian Wrote:

(04-04-2013, 09:25 AM)mulyc Wrote: It feels as though the market is thoroughly discounting the fact that they have a current net orderbook of > $12 billion with a chunk of it not even recognized as revenue yet (probably in 2013/14)

Vested.

In 2013/14, ~5billion of existing orders would be delivered. Out of these orders, there is 1.2bil worth of Pacific Class 400 jack-ups and 1.2bil worth of F&G JU3000N semis (turnkey), which should start to command higher margins than FY2012. But i guess Mr Market is discounting higher costs due to the startup at TuasView Ext Phase1 (operational ready by 2H2013) and Estaleiro Jurong Aracruz (operating by end 2014).

SCM has spent close to 1bil sgd of CAPEX over the last 2 years. There is still about 500mil more to go over the next 2 years. Looking at the cycle of 'orders-->rising profits-->repeated orders-->rising dividends--> new CAPEX', IMHO, i feel it is currently at a stage where it is still going downwards to the trough. This might explain why the share price is trending downwards.

As forumer paullow mentioned, sometimes it takes time and patience (and some ignorance on market prices)...

Look at its current book order and what does its new SG shipyard will contribute. The answer is obvious....

Let the share price dip further.The more the better!