DMG upgrades SembCorp Marine (S51.SG) to Buy from Neutral and raises its target price to $5.95 from $5.30, which values the stock at 18.7X FY11 P/E and 14.3X ex-cash P/E “While valuation is already above its 10-year mean P/E of 14.4X, we think share price could continue to re-rate on order wins and prolonged period of strong margins.”

The house notes 4Q10 net profit of $239 million (down 19% on quarter, off 20% on year), was above its expectation of $165 million and the Street estimate of $140 million. 

It raises its FY11-12 EPS estimates by 13% and 6% respectively due to a revision in the timing of revenue recognition and higher margins. 

 

It notes, more orders could be ahead, with the net orderbook at $4.8 billion 2011 year-to-date new orders stood at $361 million, accounting for 8% of its full-year forecast of $4.5 billion “We believe SMM can achieve our new orders forecast - the ten newbuild options are worth around US$2 billion ($2.55 billion) and newbuild enquiries are strong.” 

 

Shares are +2.1% at $5.32.