Keppel and Sembcorp to benefit from new Brazilian orders

21 rigs are awaiting the big shipping lines by 12 September.

According to CIMB, favourable newsflow on Petrobras rigbuilding orders appears  imminent for the shipyards as Upstream reported that Sete Brasil could ink the final contracts for the remaining 21 rigs by 12 September. 

Here's more from CIMB:

The publication also suggested that  SMM has received the LOI for the  remaining five drillships worth  S$5bn. This follows Keppel’s Apr 12  announcement of the LOI for five  semi-subs (S$5.2bn).  Our top pick is SCI as it is less
susceptible to volatile prices and is  the cheapest at 6x CY13 EV/EBITDA  vs. KEP and SMM’s 11x.

Upstream reported that Sete Brasil  has signed LOIs with four shipyards  to build the remaining 21 rigs. The  shipyards are Keppel BrasFELS,  Odebrecht, Sembcorp Marine’s  Estaleiro Jurong Aracruz and  Engevix. Petrobras is also expected  to sign the back-to-back charters  with Sete Brasil between July and  September 2012.

We believe that final construction  contracts with the shipyards could  coincide with Petrobras’s signing of  charter contracts. There has been no announcement from Sembcorp Marine on the LOI as we think that pricing negotiations could still be ongoing, with room for improvement. Success in clinching Petrobras orders should put the Singapore yards on track for our 2012 contract wins target of S$9.2bn for Keppel and S$10.2bn for Sembcorp Marine.

FPSOs. We believe KEP and SMM are keen contenders for

these projects given their track record in this segment.

Stock Picks – Large Cap

Rec’n Price ($)

5/7

Target Price

($)

SembCorp Marine Buy 5.020 5.85