Money Talk: Sembcorp Marine, RH Petrogas, Singapore land transport

SINGAPORE - Stay up to date on market chatter with our picks of the latest broker research reports, compiled by The Straits Times Money Desk.

1. Sembcorp Marine

Broker: OCBC

Sembcorp Marine announced that its subsidiary, Jurong Shipyard, has secured a US$236 million (S$296 million) contract to build a high specification, tailor-made jack-up rig for new customer Hercules North Sea.

Scheduled for delivery in 2Q16, the rig will be based on the F&G 2000E design which has enhanced features suitable for UK operations. Payment terms are 10 per cent upon contract signing, followed by another 10 per cent a year after, and finally 80 per cent upon delivery.

Recall that Sembcorp Marine also had a F&G 2000E order in Oct 2010 from Seadrill with a price tag of US$192 million per rig. Besides a general increase in jack-up rig prices, the current unit could also be priced higher due to more customisation.

Year-to-date, Sembcorp Marine has secured new orders worth about $1.93 billion, accounting for 48 per cent of our full year estimate. This also brings the group's total net order book to $13.2 billion. Maintain Buy with $4.90 fair value estimate.

2. RH Petrogas

Broker: OSK-DMG

RH Petrogas, in response to a query from the Singapore Exchange, stated that the controlling shareholders of the company have been approached by an investor regarding a potential proposal which may lead to a takeover offer. No formal offer has been made yet.

In addition, the company has been reviewing proposals for mergers and acquisitions, joint ventures and other business opportunities but no binding offer has been made as of today.

Based on our estimates,the liquidation value of RH Petrogas' assets is worth about $0.95 per share, though to an owner-operator the value of the assets could be substantially higher. We have pointed out that the company's oilfield assets appear significantly undervalued.

We currently have a Buy recommendation with a $1.23 target price.

3. Singapore land transport

Broker: Maybank Kim Eng

New entrants, armed with innovative app-based business models, look set to shake up the taxi market in Singapore as their presence continues to grow. They can be divided into two broad categories: (1) Entrant Model A, whereby companies channel passenger traffic to existing taxi drivers, and (2) Entrant Model B, whereby companies link passengers to limousines and private vehicles.

With increasing popularity, we believe the first would thrive while the second could struggle due to regulatory hurdles.

The potential loss of taxi booking income is a key headline concern. However, our analysis suggests minimal impact on the profitability of taxi operators. We argue that the new entrants would augment the overall revenue pool of Singapore's taxi industry, benefitting operators in the long run.

ComfortDelGro has the largest taxi fleet in Singapore and is thus most exposed to the impending changes. Maintain Buy and target price of $2.40. Sell SMRT.

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