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Non-Tech : Shipbuilders and shipyards
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From: Lynn5/13/2008 9:12:16 AM
   of 61
 
[Keppel and SembCorp Marine] Flash: Singapore Conglomerates - Aggressive Fleet Expansion by Petrobras; Rigs and Production Equipment Will Be Next

13 May 2008 - 6 pages

* Tender for service ships - According to Upstream.com, Petrobras has opened
a tender for 24 service ships, with supply ships (platform anchoring, tug
boats and spill control boats) accounting for almost half of the orders. The
tender is part of a bigger 146-boat order for the local shipbuilding industry
that extends to 2014.

* Massive capex - Petrobras has a budget of ~US$50bn to spend on new
equipment purchases, including ships and refinery equipment. This is part of
its US$112bn investment plan through 2012 announced in August 2007 with
US$65bn going toward E&P expenditure. US$50bn will be spent on new equipment
purchases, including ships and refinery equipment.

* Other potential orders - Petrobras CEO Jose Sergio Gabrielli also revealed
plans to build two supertankers that would be four times the size of standard
industry tankers. The company also has plans to place a huge order for
offshore drilling rigs. Recent subsalt finds require a 'considerable number'
of drilling rigs for exploration and development, but record-high oil prices
have increased the scarcity of rigs and raised the cost of leasing or buying
rigs.

* KEP and SMM are direct beneficiaries - With 89% of Petrobras' US$112bn
budget to be spent in Brazil and with strict local content requirements for
newbuilding contracts, Keppel Corp and SembCorp Marine would, in our view,
benefit as both companies operate yards in Brazil. KEP and SMM also have
technical expertise to build offshore support vessels such as service ships,
apart from drilling rigs. We re-iterate Buy/Low Risk (1L) ratings for both
KEP and SMM.
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