Biggest offshore contract

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strong vote of confidenceBiggest offshore contract from repeat customer is a

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asset replacement cycleFrontrunner among Chinese offshore players riding the

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closer to our S$3.16 TP.BUY Robust order flow in 2011 to drive share price

A big leap in offshore.

LOIs for two drilling units worth US$525m each with Sevan.

Total value of US$1.05bn is the biggest single offshore

contract Cosco has secured thus far. In addition, the LOIs

provide options for up to two rigs totaling US$1.05bn. Good

flow of orders from a repeat customer is a vote of confidence

for Cosco’s offshore capability and product quality. Contracts

will be finalised with the approval of listing for Sevan’s drilling

arm to Oslo exchange by April, raising US$350m to fund the

newbuild orders.Cosco announced that it has inked

The start of the party.

footsteps of Singapore rigbuilders. We believe active enquiriesThis sizeable win follows the

received since 4Q10 will translate into firm orders in months

ahead, and hence could re-rate Cosco’s share price, which

has been overshadowed by concerns on dry bulk shipping and

steel cost amidst weak market sentiment. Cosco is emerging

to be a major offshore player in China, its offshore

contribution to revenue is expected to rise from 24% in FY10

to 40% by 2012. It is tendering for offshore orders - FPSOs,

semi-sub rigs and wind turbine installation vessels - totaling

over US$3bn, which provides upside to our new order win

assumptions of US$2bn., if it succeeds in securing them.

Order flow to catalyse share price.

target price of S$3.16, based on blended FY11/12F PE and

P/BV. Catalysts in place are: (1) stronger offshore contract

flows 2) injection of strategic stakes by the parent and 3)

timely shipbuilding delivery. Key risks are steel price increase,