SINGAPORE (Sept 19): CIMB Research estimates that Sembcorp Marine could bag contracts worth between US$440 million ($592 million) and US$500 million from US gas company SeaOne Holdings.

SembMarine on Monday signed a letter of intent (LoI) with SeaOne for the design and construction of at least two large Compressed Gas Liquid (CGL) carriers.

“This news is positive for SMM,” says CIMB analyst Lim Siew Khee in a report on Monday. “We believe the contracts will materialise by end-2017F or early 2018F, which could excite the market, given the large size.”

See: SembMarine partners US gas company SeaOne in fuel supply project

According to Lim, the contracts could lift SembMarine’s lacklustre order momentum.

“The company is still hoping to see some FPSO (floating production storage and offloading) and gas-related contract wins,” says Lim. Year-to-date, the group has only won close to $270 million in orders.

CIMB is keeping its “add” call on SembMarine with a target price of $1.87, which is based on 1.5x of its estimated FY17 P/BV.

The positive stance comes despite SembMarine posting a 51.2% drop in earnings to $5.6 million for the 2Q ended June, on the back of a 27.8% decline in revenue to $655.5 million.

The decline was mainly due to the lower revenue recognition for rig building and offshore platforms projects.

See: SembMarine 2Q earnings halved to $5.6 mil

“Stronger-than-expected order wins and successful sale of delayed rigs are potential key catalysts for SMM,” says Lim.

As at 12.32pm, shares in SembMarine are trading 4 cents higher at $1.67, implying a P/E forecast of 44.5x and an estimated dividend yield of 2.0% in CY17. Year-to-date, its share price has climbed 21.0%.