deutsche bank0903 GMT 9 Jan STOCK CALL: While both Keppel (BN4.SG) and SembMarine (S51.SG) are well positioned to benefit from increased industry spending and replacement opportunities, Deutsche Bank prefers Keppel.

“SembMarine is currently at a build-up stage for two large new yards, which we believe could involve more risks as operations begin.”

SembMarine’s 2013-15 margins may be pressured as drillship contracts are executed in Brazil as it is new to drillship construction and the yard, currently under construction, may face potential cost overruns, skilled labor shortages, construction delays and other teething issues typical for new Brazilian facilities, it says. It expects SembMarine’s new Singapore yard may face some labor issues as the government controls foreign labor, while the departure of the long-time senior marketing personnel and the recent jack-up-rig mishap are also areas to monitor.

Keppel’s strategy of being near markets and customers is paying off, with its Brazil yard one of the country’s “most experienced” facilities, putting it in a good position to execute, it says. It sets Keppel’s target at S$13.50 and Sembcorp’s (U96.SG) at S$6.35, rating both Buy. It rates SembMarine at Hold with S$4.90 target.

- Leslie Shaffer, (c) Dow Jones & Company

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