Defence contract confirmed
? SMM secured its first EPC contract of the year from the Brazilian Navy. We
think this contract enhances SMM’s competitiveness against Korean peers.
? The vessel, NApAnt, is worth US$150m (c.S$200m). SMM expects to
complete the vessel in 3Q25.
? We estimate YTD order wins to be at S$800m-915m, following the WTIV
contract secured in Mar 22. We reiterate Hold and TP of S$0.09.
First EPC contract secured in FY22F, worth US$150m
? SMM secured an Engineering, Procurement, and Construction (EPC) contract w orth
US$150m (c.S$200m) from Emgepron, a state-ow ned company linked to the Ministry of
Defence in Brazil. The contract is based on typical contract payment scheme.
? The EPC contract involves a new build support vessel, the NApAnt, for the Brazilian Navy
for scientific research deployment in the Antarctic. It measures 93.9m in length, 18.5m
in w idth, and w eighs about 5,800 metric tonnes w ith a draft of 6 metres. The NApAnt is
built to navigational ice field standards, and is classified as P-6.
? The vessel w ill be constructed in SMM’s yard in Brazil, commencing in 1Q23 w ith
scheduled completion in 3Q25. On completion, NApAnt w ill replace the ocean support
vessel (NApOc) Ary Rongel (H-44). It is expected to add a new operative dimension to
the Brazilian Antarctic Programme.
? Recall that SMM secured repair jobs for three US Navy vessels in 1Q22. We think that
establishing an expertise in defence may give it a competitive edge against its Korean
competitors, and may thus command higher margins.
We estimate YTD order wins to be between S$800m and S$915m
? We believe this EPC contract raises the company’s current net orderbook to S$1.95bn,
from S$1.75bn in 1Q22.
? In Mar 22, SMM secured a contract for the construction of a w ind turbine installation
vessel (WTIV) from Maersk Supply Service. The management guided that this WTIV
contract is in the range of S$600m-715m in value.
? With the EPC contract w ith the Brazilian Navy, w e estimate YTD order w ins to be
S$800m-915m. We project S$2bn order w ins for FY22F.
Reiterate Hold and TP of S$0.09
? We base our TP on 0.8x FY22F P/BV (3-year historical average). We see potential for
discount to narrow post-merger completion of KEP/SMM in 4Q22 as SMM can ride on
KEP O&M’s order w ins. YTD, KEP O&M secured FPSO integration contracts w orth
S$250m. Key catalysts: more order w ins for both SMM and KEP O&M and faster-thanexpected project deliveries. Dow nside risks: cancellation of orders.