SEOUL, KOREA - We expect strong drilling rig order momentum to resume for SHI. In 1H13, Korea’s Big 3 shipbuilders have secured only two drilling rig orders (one for SHI, one for HHI) as ship owners were unable to find charterers for ships ordered in 2011-2012. But, this should resolve soon as four to five charter deals are near completion.
- SHI has secured USD3.1bn (one drillship, nine LNGC/FSRU, seven container ships) in YTD orders, 23.8% of the annual order target of USD13bn. While YTD results lag competitors, we expect stronger order momentum going forward.
- We maintain BUY and a TP of W44,000, 1.5x 12MF PB, the mid-cycle level. We believe the current PB of 1.2x (bottom of the band) is attractive given solid margins and new order visibility. As such, shares should continue to rally as drilling rig orders resume.
*Source: Korea Investment & Securities Co.
