0729 GMT [Dow Jones] STOCK CALL: DMG & Partners remains bullish on Singapore’s offshore and marine sector despite shares rising 15%-36% year-to-date. While P/E valuations have expanded 40%-70% from 2011’s lows, current valuations at 13X-17X are well below the last upcycle’s 25X-30X peak. DMG says underlying market drivers remain positive, with global oil demand growing, crude prices remaining above US$100/bbl and a bullish E&P spending outlook. It notes rising charter rates and an attractive payback period are likely to draw renewed interest in newbuild drilling rigs. It expects Petrobras offers more opportunities than just deepwater rig projects;
“Keppel O&M and SembCorp Marine (S51.SG) are well-positioned for more big-ticket wins.” It keeps a sector Overweight, with a preference for big-cap plays for direct exposure to Petrobras-related jobs. It switches its top pick to Keppel Corp.
(BN4.SG), rated Buy with S$13.40 target, after a 36% year-to-date rise for SembMarine, rated Buy with S$6.00 target. It tips avoiding Chinese shipbuilders as poor commercial-shipbuilding outlook and depressed new-contract margins could hit FY13-14 earnings.
[I]- Leslie Shaffer, Dow Jones & Company[/I]