Solid 2Q09: Headline and clean EPS came in 5% and 10% ahead of our estimates. We believe we could see a high-single digit upgrade to consensus on these results.

New order: Small, but total is adding up. SMM has secured a $S160 million conversion job with Modec. While small, SMM has now covered 41% of our 2009 order intake expectation, versus only 9% for Keppel.

Preparing for Brazil: SMM’s positioning for upcoming Petrobras tenders dominated Q&A. SMM highlighted its partnership with Mac Laren, a medium sized yard in Rio, and referred to its own experience with projects in Brazil.

In terms of local experience, SMM is second only to Keppel in our view. SMM indicated that they would try to participate in the second phase of the 8 FPSO tender.

SMM would not specify the exact levels of revenue share between itself and Mac Laren, who can get up to 49%, although it depends on the project type (we pencil in a 25% share for them, on average). But, SMM did indicate that they are not precluded from seeking other/additional capacity in Brazil. Indeed, the merits of a “multi-pronged” presence are being investigated today.

In terms of competition, management felt the pie in Brazil was big enough to accommodate many players. It would not directly comment on whether a 15-20% cut in rig prices (mentioned on NOV’s recent 2Q09 comments) would impact shipyard margins, which we think is a risk. It did say that margins for 2009 would be up YoY.

All eyes to SCI: With this solid quarter reported, we look forward to parent Sembcorp Industries’ (SCIL.SI, OW, S$3.27) numbers on Thursday. We think that the stub utilities business is set to turn around. At 8.8x P/E, we believe the stub’s valuation is cheap versus its 12.6x historical average. It’s our top pick.