UOB Kay Hian Securities Bullish On Shipyards; Upgrades Keppel

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February 24, 2011

UOB KayHian (Thailand) says jack-up rig orders are “roaring” while containership ordering has begun. The house upgrades Keppel Corp. (BN4.SG) to Buy from Sell, raises its target to S$13.00 from S$9.70, and ups its O&M pre-tax margin assumptions for 2012 and 2013 by 1.5 percentage points from 13.5% to 15.0%. It also raises its 2011 contract win forecast (excluding Petrobras) to S$7 billion from S$4 billion.

The house keeps SembCorp Marine (S51.SG) at Hold and raises its target to S$4.90 from S$4.60; “while our contract win assumptions for SMM have also been raised, we maintain our margin assumptions at 15.0% for 2011 and 13.0% for 2012 and 2013.” The house notes containership contracting (orders for new ships) is at the beginning of a cyclical upturn, well below last cycle’s peak in 2007, with the container segment expected to have the healthiest demand-supply balance in 2012/13; “among the shipyards under our coverage, we see Yangzijiang Shipbuilding (BS6.SG) as the best play on containership orders.” It keeps a Buy call with an unchanged S$2.37 target.

By Matthew Allen, (c) 2011 Dow Jones & Company, Inc.

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