Earnings on recovery mode

• Strong visibility from record orderbook

• Robust pipeline FY13 order wins raised to S$5bn

•

FY13Earnings to bottom in FY12 and poised for recovery from

• Maintain BUY, TP S$5.85

Major Petrobras orders secured strong visibility from record

orderbook.

added to its orderbook. Included were the five drillships and the

two anticipated FPSO projects for Petrobras. These have set new

records for SMM, with FY12 YTD order wins of S$9.1bn exceeding

pre-crisis peaks, and its S$12.6bn orderbook translating to a bookto-

bill of 2.6x, extending earnings visibility.August was a bumper month for SMM, with S$6.1bn

Robust pipeline FY13F order wins raised to S$5bn.

back of rising rig day rates and tightening rig capacity, the pipeline

for potential orders remains robust. We raise our FY13 order wins

assumption to S$5.0bn (prev S$4.0bn) in view of this no change

to our FY12 non-Petrobras order wins assumption of S$5bn. In the

near term, we see SMM as a key contender for two harsh

environment Cat J jackups for Statoil worth > US$1bn.On the

Earnings to bottom in FY12 poised for recovery from FY13.

We expect earnings to bottom in FY12, before recovering 17% yo-

y in FY13F, and 4% in FY14F. The recovery in earnings is

expected to commence from 2H12, which forms 61% of our

FY12F, buoyed by higher turnover and improved margins. We

maintain our FY13F despite raising our order wins assumption as

we tweak our orderbook recognition schedule. Growth in

FY13/14F is underpinned by higher revenues from orderbook

drawdown, and on commencement of higher-margin ship repair

contributions from the new yard in FY13, with full year

contributions from all 4 drydocks in FY14.

Maintain BUY.

maintained. We have pegged the valuation of its core businesses

to 16x FY13 PE (unchanged), +0.5SD to historical mean. SMM is a

prime beneficiary of the current upcycle of deepwater, harsh

environment rigs. We see near term catalysts in the form of strong

order wins momentum on a robust project pipeline and improving

earnings outlook. Maintain BUY.Our SOTP-based TP for SMM of S$5.85 is