earnings

• 3Q12 below on slow orderbook drawdown

• Lower EBIT margins of 10-13% next year

• FY12/13F cut by 15%/13%

• Maintain BUY, TP trimmed to S$5.20

3Q12 below on slow orderbook drawdown.

fell 48% y-o-y to S$116m, below expectations due to slowerthan-

expected drawdown of orderbook on new projects. Only

one jackup from Noble hit the 20% recognition milestone this

quarter vs. 3 projects in 2Q12, while 3Q11 was boosted by the

recognition of the

contribution weakened to S$12.7m, down 27% due to lower

contributions from Cosco Shipyard Group.3Q12 PATMISonga Eclipse semisub rig. Associates'

EBIT margins continue to improve to 14.1%.

margin improved by 1ppt q-o-q to 14.1% stripping out the

impact of forex losses of S$14.8m from the revaluation of Euro

and USD-denominated assets into the strong SGD, we estimate

3Q EBIT margin to have been a much healthier 15.8%.3Q EBIT

FY12-14F cut by 4%-15%.

15% as we 1) adjust our orderbook recognition schedule, 2)

lower EBIT margins by 0.6-1.4ppt, 3) trim FY12 order wins by

S$0.5bn to S$11.4bn. 4Q12 should be the best quarter for the

year, on expectations of higher margins and sales, which should

be boosted by the initial recognition of its first drillship for Sete

Brazil, while margins will be boosted by the completion of Safin

jackup and GDI jackup which will be completed in 1Q13,

offsetting lower margins from the drillship.We cut FY12-14F earnings by 4-

Maintain BUY, TP trimmed to S$5.20.

trimmed to S$5.20, with its core businesses pegged to 16x

FY13 PE (unchanged). While the stock could come under near

term pressure due to earnings cut on lower margin guidance,

SMM remains a prime beneficiary of the current upcycle for

demand of deepwater, harsh environment rigs. With a net

orderbook of S$12.1bn, buoyed by record FY12 YTD order wins

of S$9.1bn, revenue visibility is strong. However, we believe

margins could be under pressure in the range of 10% to 13%

as new rig designs are affected by the impact of learning curve

in the initial ramp up phase. On a brighter note, higher

shiprepair sales from capacity expansion at the new Tuas yard

will raise the overall blended margins for the group in the long

run.Our SOTP-based TP is