SINGAPORE (Feb 23): RHB is maintaining its “neutral” call on Sembcorp Marine with a higher target price of $1.46 despite improving outlook on unattractive valuation even as it forecasts higher FY17 earnings.

Currently, SembMarine’s orderbook stands at $4.7 billion, a healthy mix of drillships, floaters, jack-up rigs, offshore platforms and semi-submersibles.

While the current orderbook excludes $3.1 billion of Sete Brasil drillships, RHB says the resumption of the contract could be a catalyst for SembMarine.

In FY16, orderbook replenishment came in at only $320 million, which is the lowest for the past eight years. RHB understands that the majority of its orderbook is on progress payment terms.

With the improvement in crude oil prices, SembMarine is experiencing an increase in enquiries for non-drilling solutions, which RHB believes is a sign that development projects are not far off.

“We maintain our assumption of $1 billion of new orderbook for FY17 coming from floaters, offshore platforms and non-drilling solutions,” says RHB.

Shares of SembMarine are up 20 cents at $1.73.

(See also: SembMarine returns to profitability in 4Q on absence of one-off impairments, provisions)