Finally my SCI can see the light again.
Waited for so freaking long. Avg cost was 3.02
A more promising year for O&M sector: Deutsche
By: Gwyneth Yeo
SINGAPORE (Jan 6): Deutsche Bank Markets Research is raising its target prices for
Keppel Corporation,
Sembcorp Industries, and
Sembcorp Marine for 2017, ahead of what could be a better year for the offshore and marine sector.
According to Deutsche analyst Joshua Lee, the sector will see a doubling in the numbers of sanctioned 2017 offshore projects, higher oil prices, and first steps toward resolving SembMarine and Keppel’s Sete Brasil orders.
“The removal of Petrobras’ mandatory production sharing requirement would speed up entry of foreign operators,” says Lee. “However, we note that it could take as long as 15 years for the jack up drilling rig market to normalize, compared to four years for floating offshore drilling rigs.”
27% of Keppel’s orderbook is in the jack up rig segment, compared with 11% of SembMarine’s.
Incidentally, Lee thinks
it is the utilities business that would prove to be more challenging given that Singapore electricity prices have declined over the past five years and has finally seen the bottom.
While low wholesale electricity prices impacts both Keppel and Sembcorp, the former continues to incur losses and the latter continues to build a pipeline of overseas projects up to 2018 that will increase its current electricity generation capacity by up to 40%.
To that end,
SembMarine remains Lee’s preferred stock — with a raised target price of $1.80 to $1.90 — given the
prospect of higher oil prices, its improved new order positioning, and lower impairment risk.
At the same time, the brokerage reduced its conglomerate discount for both Keppel and Sembcorp from 20% to 15%.
Lee maintained his “buy” recommendation for Keppel and raised its target price from $5.50 to $5.90. He also upgraded Sembcorp from a “hold” to a “buy” rating, with a raised target price from $3.15 to $3.45.
Shares in Keppel, Sembcorp and SembMarine closed at $5.99, $3.00 and $1.49 on Friday.

