SINGAPORE (Mar 6): DBS is reiterating its “buy” recommendation on Sembcorp Marine (SMM) with an unchanged target price of $2.90.
This came on the back of Upstream reporting yesterday that Energean Oil & Gas has handed out a US$1.36 billion ($1.79 billion) contract to TechnipFMC for the floating production, storage and offloading (FPSO) unit for its proposed Karish gas field development off Israel.
See: As oil recovers, new contracts trickle in for SembMarine and Keppel
This was announced after Energean said in a press release that it has inked a US$1.28 billion facility agreement with four international banks – Morgan Stanley, Natixis, Bank Hapoalim and Societe Generale – to finance the Karish development project.
In a Tuesday report, analyst Pei Hwa Ho says, “TechnipFMC is expected to release further information on the contract soon, which would include details on the partnering shipyard.”
Subsequently, SMM is reportedly the forerunner to partner Technip for the construction of the vessel.
“If the deal materialises, this will be SMM’s first major contract for this year and confidence booster on order win momentum,” says Ho.
Last year, TechnipFMC performed front-end engineering and design studies (FEED) on the deep-water gas project last.
Under the Engineering, Procurement, Construction, Installation & Commissioning (EPCIC) contract, TechnipFMC is expected to take on the development risk, as well as overseeing the appointed shipyard’s work on the FPSO.
The unit is set to be 227m long and 50m wide. There will also be two gas trains, one oil train of 14,000 barrels per day, and a water train of 4,000 barrels per day.
“Recent price correction offers good buying opportunities," says Ho.
As at 12.25pm, shares in Sembcorp Marine are trading 7 cents or 3.68% higher at $1.97, giving it a price-to-book ratio of 1.6 with a dividend yield of 1.1%.
