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October 12, 2010

DMG & Partners Securities Pte Ltd may have received compensation from the company(s) covered in this report for itscorporate finance or its dealing activities; this report is therefore classified as a non-independent report. Please refer toimportant disclosures at the end of this publication.

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DMG Research

OSK ResearchOSK ResearchDMG Research

SINGAPORE EQUITYInvestment Research

DMG & Partners Research Corporate Update Private Circulation Only

OFFSHORE & MARINEJason Saw+65 6232 3871jason.saw@dmgaps.com.sg

SEMBCORP MARINE SELL Price S$4.29

Previous S$3.73

Target S$3.73

Offshore & Marine

Sembcorp Marine is a leading global marineand offshore engineering group and is wellknown for its rig building expertise.

Stock Profile/Statistics

Bloomberg Ticker SMM SPSTI 3,149Issued Share Capital (m) 2,076Market Capitalisation (S$m) 8,90752 week H | L Price (S$) 4.50 3.18Average Volume (000) 4,754YTD Returns (%) 17%Net gearing (%) Net cashAltman Z-Score 4.3ROCE/WACC 1.9Beta (x) 1.5Book Value/share (S) 100

Major Shareholders (%)

Sembcorp Industries 61%

Share Performance (%)

Month Absolute Relative1m 9% 5%3m 8% 0%6m 2% -4%12m 33% 16%

6-month Share Price Performance

Secures S$351m FPSO conversion contract

Another new order win but no major change to earnings: Sembcorp Marine(SMM) announced that they have won a S$351m FPSO conversion contract fromTeekay Petrojari to be delivered in 1Q2012. On completion, Teekay will charter

the FPSO to Petrobras for a period of nine years with options. In the past twomonths, SMM has won several new projects effectively worth S$900m, boostingits order book to S$5.2b. We revisited the delivery schedule of the projectssecured and tweak our earnings forecast marginally: raise FY11 EPS by 1% andrevise downwards FY12 EPS by 2%. Despite the new order win, there are nomajor changes in our earnings forecasts as we have factored in S$2.5b andS$3.5b new job wins in FY10-11 respectively. Maintain SELL with an unchangedTP at S$3.73, 13% downside from its current share price.

First FPSO job from Teekay Petrojari: The FPSO conversion job is the firstcontract awarded by Teekay to SMM and this could lead to more jobs in thefuture.Under this contract, SMMs Jurong Shipyard will convert a Aframax tankerto a FPSO, to be renamed FPSO Petrojari Cidade de Itajai, and is scheduled for

delivery in 1Q2012. The FPSO is capable of processing at least 80,000 barrels ofoil per day and is designed to remain on the field for 15 years without drydocking. Teekay Petrojari is the largest operator of FPSO in the North Sea andowns five FPSOs (four units operating in Europe and one in Brazil).

YTD order win gaining pace but well below peak levels. We have seen astronger pace of order win in 2H10: S$900m order wins between Jul10 andOct10 vs. S$853m order wins in 1H10. Excluding the S$600m options for three jackup rigs by Atwood Oceanics, the latest order win lifted YTD order wins toS$1.75b. The pace of new order replenishment is getting closer to ourexpectation of S$2.5b for the whole of FY10 but well below annual order intake inexcess of S$5b in 2007-08 and this will translates into lower earnings in FY11-12.We expect 3-year EPS CAGR of -11% over FY09-12F.

FYE 31 Dec (S$ m) FY08 FY09 FY10F FY11F FY12F

Turnover 5,064 5,725 4,958 4,136 4,276Net profit 430 700 705 499 498% chg YoY 78 63 1 -29 0DMG/consensus (x) 1.00 1.00 1.07 0.92 0.96EPS (S) 21 34 34 24 24DPS (S) 11 15 15 11 11Div Yield 2.6 3.5 3.6 2.5 2.5ROE (%) 29 44 31 21 19ROA (%) 9 15 14 10 9P/E (x) 20.7 12.7 12.6 17.8 17.9P/B (x) 6.8 4.7 3.9 3.5 3.2

Source: Company and DMG Estimates

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DMG Research

DMG & Partners Research Guide to Investment Ratings

Buy: Share price may exceed 10% over the next 12 months

Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain

Neutral: Share price may fall within the range of +/- 10% over the next 12 months

Take Profit: Target price has been attained. Look to accumulate at lower levels

Sell: Share price may fall by more than 10% over the next 12 months

Not Rated: Stock is not within regular research coverage

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This research is issued by DMG & Partners Research Pte Ltd and it is for general distribution only. It does not have any regard to the specificinvestment objectives, financial situation and particular needs of any specific recipient of this research report. You should independently evaluateparticular investments and consult an independent financial adviser before making any investments or entering into any transaction in relation toany securities or investment instruments mentioned in this report.

The information contained herein has been obtained from sources we believed to be reliable but we do not make any representation or warrantynor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions and views expressed in t his report are subject tochange without notice.

This report does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities.

DMG & Partners Research Pte Ltd is a wholly owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture between OSK InvestmentBank Berhad and Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group). DMG & Partners Securities Pte Ltd is a Memberof the Singapore Exchange Securities Trading Limited.

DMG & Partners Securities Pte Ltd and their associates, directors, and/or employees may have positions in, and may effect transactions in thesecurities covered in the report, and may also perform or seek to perform broking and other corporate finance related services for the corporationswhose securities are covered in the report.

As of the day before 12 October 2010, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd, do nothave proprietary positions in the subject companies, except for:

a) Nilb) Nil

As of the day before 12 October 2010, none of the analysts who covered the stock in this report has an interest in the subject companies coveredin this report, except for:

Analyst Companya) Nilb) Nil

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