Sembcorp Marine - Defence Contract Confirmed
- Sembcorp Marine (SGX:S51) secured an Engineering, Procurement, and Construction (EPC) contract worth US$150m (~S$200m) from Emgepron, a state-owned company linked to the Ministry of Defence in Brazil. The contract is based on typical contract payment scheme.
- The vessel will be constructed in Sembcorp Marine’s yard in Brazil, commencing in 1Q23 with scheduled completion in 3Q25.
- Recall that Sembcorp Marine secured repair jobs for three US Navy vessels in 1Q22. We think that establishing an expertise in defence may give it a competitive edge against its Korean competitors, and may thus command higher margins.
- We believe this EPC contract raises Sembcorp Marine’s current net orderbook to S$1.95bn, from S$1.75bn in 1Q22.
- Reiterate HOLD and target price of S$0.09 for Sembcorp Marine. We base our target price on 0.8x FY22F P/BV (3-year historical average). We see potential for discount to narrow post-merger completion of Keppel Corp (SGX:BN4) & Sembcorp Marine in 4Q22 as Sembcorp Marine can ride on Keppel O&M’s order wins.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
LIM Siew Khee CGS-CIMB Research | Izabella TAN CGS-CIMB Research | https://www.cgs-cimb.com 2022-06-14 2022-06-14
Previous report by CGS-CIMB:
2022-05-18 Sembcorp Marine - Clearing Headwinds
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