October 12, 2010

SINGAPORE EQUITY
Investment Research

DMG & Partners Research Corporate Update Private Circulation Only

OFFSHORE & MARINE


Jason Saw
+65 6232 3871 SEMBCORP MARINE SELL
jason.saw@dmgaps.com.sg Price S$4.29
Previous S$3.73
Target S$3.73

Offshore & Marine Secures S$351m FPSO conversion contract

Sembcorp Marine is a leading global marine
and offshore engineering group and is well
Another new order win but no major change to earnings: Sembcorp Marine
known for its rig building expertise.
(SMM) announced that they have won a S$351m FPSO conversion contract from
Stock Profile/Statistics Teekay Petrojari to be delivered in 1Q2012. On completion, Teekay will charter
Bloomberg Ticker SMM SP the FPSO to Petrobras for a period of nine years with options. In the past two
STI 3,149 months, SMM has won several new projects effectively worth S$900m, boosting
Issued Share Capital (m) 2,076 its order book to S$5.2b. We revisited the delivery schedule of the projects
Market Capitalisation (S$m) 8,907
52 week H | L Price (S$) 4.50 3.18
secured and tweak our earnings forecast marginally: raise FY11 EPS by 1% and
Average Volume (‘000) 4,754 revise downwards FY12 EPS by 2%. Despite the new order win, there are no
YTD Returns (%) 17% major changes in our earnings forecasts as we have factored in S$2.5b and
Net gearing (%) Net cash S$3.5b new job wins in FY10-11 respectively. Maintain SELL with an unchanged
Altman Z-Score 4.3
ROCE/WACC 1.9
TP at S$3.73, 13% downside from its current share price.
Beta (x) 1.5
Book Value/share (S¢) 100 First FPSO job from Teekay Petrojari: The FPSO conversion job is the first
contract awarded by Teekay to SMM and this could lead to more jobs in the
Major Shareholders (%)
future. Under this contract, SMM’s Jurong Shipyard will convert a Aframax tanker
Sembcorp Industries 61%
to a FPSO, to be renamed FPSO Petrojari Cidade de Itajai, and is scheduled for
delivery in 1Q2012. The FPSO is capable of processing at least 80,000 barrels of
oil per day and is designed to remain on the field for 15 years without dry
docking. Teekay Petrojari is the largest operator of FPSO in the North Sea and
owns five FPSOs (four units operating in Europe and one in Brazil).
Share Performance (%)
Month Absolute Relative YTD order win gaining pace but well below peak levels. We have seen a
1m 9% 5% stronger pace of order win in 2H10: S$900m order wins between Jul10 and
3m 8% 0% Oct10 vs. S$853m order wins in 1H10. Excluding the S$600m options for three
6m 2% -4%
12m 33% 16%
jackup rigs by Atwood Oceanics, the latest order win lifted YTD order wins to
S$1.75b. The pace of new order replenishment is getting closer to our
6-month Share Price Performance expectation of S$2.5b for the whole of FY10 but well below annual order intake in
excess of S$5b in 2007-08 and this will translates into lower earnings in FY11-12.
We expect 3-year EPS CAGR of -11% over FY09-12F.

FYE 31 Dec (S$ m) FY08 FY09 FY10F FY11F FY12F

Turnover 5,064 5,725 4,958 4,136 4,276
Net profit 430 700 705 499 498
% chg YoY 78 63 1 -29 0
DMG/consensus (x) 1.00 1.00 1.07 0.92 0.96
EPS (S¢) 21 34 34 24 24
DPS (S¢) 11 15 15 11 11
Div Yield 2.6 3.5 3.6 2.5 2.5
ROE (%) 29 44 31 21 19
ROA (%) 9 15 14 10 9
P/E (x) 20.7 12.7 12.6 17.8 17.9
P/B (x) 6.8 4.7 3.9 3.5 3.2
Source: Company and DMG Estimates

DMG Research
DMG & Partners Securities Pte Ltd may have received compensation from the company(s) covered in this report for its
corporate finance or its dealing activities; this report is therefore classified as a non-independent report. Please refer to
important disclosures at the end of this publication. OSK Research
See important disclosures at the end of this publication DMG
OSK Research 1
See important disclosures at the end of this publication
DMG & Partners Research Guide to Investment Ratings

Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage

DISCLAIMERS

This research is issued by DMG & Partners Research Pte Ltd and it is for general distribution only. It does not have any regard to the specific
investment objectives, financial situation and particular needs of any specific recipient of this research report. You should independently evaluate
particular investments and consult an independent financial adviser before making any investments or entering into any transaction in relation to
any securities or investment instruments mentioned in this report.

The information contained herein has been obtained from sources we believed to be reliable but we do not make any representation or warranty
nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions and views expressed in this report are subject to
change without notice.

This report does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities.

DMG & Partners Research Pte Ltd is a wholly owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture between OSK Investment
Bank Berhad and Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group). DMG & Partners Securities Pte Ltd is a Member
of the Singapore Exchange Securities Trading Limited.

DMG & Partners Securities Pte Ltd and their associates, directors, and/or employees may have positions in, and may effect transactions in the
securities covered in the report, and may also perform or seek to perform broking and other corporate finance related services for the corporations
whose securities are covered in the report.

As of the day before 12 October 2010, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd, do not
have proprietary positions in the subject companies, except for:
a) Nil
b) Nil

As of the day before 12 October 2010, none of the analysts who covered the stock in this report has an interest in the subject companies covered
in this report, except for:
Analyst Company
a) Nil
b) Nil

DMG & Partners Research Pte. Ltd. (Reg. No. 200808705N)

Kuala Lumpur Hong Kong Singapore Jakarta Shanghai

Malaysia Headquarters
OSK Research Sdn. Bhd.
6th Floor, Plaza OSK
Jalan Ampang
50450 Kuala Lumpur
Malaysia
Tel : + (60) 3 9207 7688
Fax : + (60) 3 2175 3202
Hong Kong Office
OSK Securities
Hong Kong Ltd
12th Floor,
World-Wide House
19 Des Voeux Road
Central, Hong Kong
Tel : + (852) 2525 1118
Fax : + (852) 2810 0908
Singapore Office Jakarta Office
DMG & Partners PT OSK Nusadana Securities
Securities Pte. Ltd. Indonesia
20 Raffles Place Plaza Lippo, 14th Floor,
#22-01 Ocean Towers Jl. Jend. Sudirman Kav. 25.
Singapore 048620 Jakarta 12920
Tel : + (65) 6533 1818 Indonesia
Fax : + (65) 6532 6211 Tel : + (6221) 520 4599
Fax : + (6221) 520 4598
Shanghai Office
OSK (China) Investment
Advisory Co Ltd
Room 6506, Plaza 66
No. 1266 West Nanjing Road
Shanghai 200040
China
Tel: + (8621) 6288 9611
Fax: + (8621) 6288 9633

See important disclosures at the end of this publication DMG Research 2

See important disclosures at the end of this publication