Excerpts from Deutsche Bank report
City Development (Buy; CMP: SGD8.85) has been one of the best performing stocks in Singapore this year. After the 18% share price rally in City Development (vs. FSSTI: -1.3%), we believe Sembcorp Marine (SMM) would provide better upside potential.  A semi-submersible oil rig built by SembCorp Marine a few years ago. Photo: CompanyOur conversations with investors suggest offshore and marine (O&M) is an under-owned sector. Hence, we replace City Development with SMM in our top buy list (TP SGD1.95). SMM shares have seen heavy selling amid falling crude oil prices since mid-2014. We see limited downside risks now, as: (1) majority of its order book has delivery dates in the next 2-3 years when oil prices should be stronger; reducing deferment/impairment risks; and (2) bulk of its order book exposure is not in the oversupplied shallow water space. SMM also has greater expertise in the deepwater space (drill-ships and semi-subs) from an order book perspective among Singapore O&M peers, and this reinforces our view that deepwater remains a long-term growth story. We retain ComfortDelGro (TP SGD3.51), DBS Group (TP SGD19.8), First Resources (TP SGD2) and SingTel (TP SGD4.6) in our top picks list. Full report here. |