IIFL starts SembCorp Marine (S51.SG) at Buy with a $6.83 target price. Says SMM led the revival of new jack-up rig orders in 2H10; “We expect it to consolidate its lead with 11 new jack-up orders (including eight option exercises and three new orders) in 2011. The company is unlikely to win the Petrobras tenders, but its order book will be boosted by a renewed building cycle for competitive fleets.” 

Tips core earnings to rebound by 28% in 2012, 30% in 2013 to surpass the $1 billion mark. House’s target values the stock based on 18X 2011 forward P/E plus $1.6 billion residual cash. 

 

Says demand for high-spec rigs will remain strong, thanks to: the rebound in the investment sentiment of rig operators, fuelled by uptick in oil price; and the desire of rig operators to upgrade their fleet with more advanced rigs, which generate higher day-rates and more contracts for them. 

 

Shares are off 0.8% at $5.23.