"The first major contract win this year contributes approximately 15% of our full-year expectation of $3 billion," says analyst Ho Pei Hwa in a Wednesday report.
SembMarine this morning announced it has secured the EPC contract for the hull and living quarters for a new build FPSO from Energean’s EPCIC contractor – TechnipFMC.
The contract value is not disclosed but Ho expects it to be slightly higher than its previous expectation of $400 million and closer to $500 million as the project also includes the fabrication and integration of various topside modules, as well as the installation of owner-furnished equipment.
"We believe strong order-flow will drive SembMarine closer to our current target price and further rerating will be driven by earnings recovery. Stock could rerate to 3x book or $3.90 with $5 billion revenue and 8% EBIT margin," says Ho.
DBS is maintaining its "buy" and target price of $2.90, based on 2.4 times FY18 book value which is 0.5 SD below mean.
The share’s pullback from the recent high of $2.80 has removed the M&A premium ascribed, thus providing a better entry point to position for a sector recovery.
"We favour SembMarine as a key proxy to the recovery in the O&G and O&M sectors, with strong order wins as key re-rating catalyst," says Ho.
As at 2.55pm, shares in SembMarine are trading at $2.18 or 90.8 times FY18 forecast earnings. Year to date, the stock is up 16.6%.
