SMM’s subsidiary secured a S$230 mn contract to construct two offshore platforms in Gajah Baru Field, Indonesia. This brings SMM YTD total contract win to S$601 mn or 20% of our FY09 assumption (Fig 1). There is no material change to our estimates.

Separately, the court-appointed liquidators for Petroprod have formally declared the company to be insolvent. Petroprod’s CJ70 jack-up was to be delivered in 3Q10. The company owed US$149 mn to SMM. We have not removed Larsen group rigs from our estimates, by default giving SMM the full benefit of doubt.

Even with our above consensus earnings and new contract estimates, we are not able to justify SMM’s trading valuations. Excluding COSCO’s earnings, SMM O&M 2010E P/E is heading towards its up cycle period average, which appears aggressive to us.

New contract win accounts for 22% and 57% of our 2010-11E earnings. Additional earnings risks from COSCO Corp, contract cancellations and rig prices are not insubstantial. Valuation is well ahead of fundamentals here. We maintain our UNDERPERFORM rating.