October 18, 2010

Sembcorp Marine Limited SIN:S51 SCMN.SI

Symbol SIN:S51 Exchange SGX Current Price 4.50 52 Week High/ Low 3.23 – 4.50 Shares Outstanding (in mn) 2.01B Market Cap (in $ mn) 9.23B Annual Dividend 0.11c

Recommendation:

With 2 major deals signed and earnings to be released this week we have a $7.20 price target on Sembcorp Marine in 2011.

Crown casinos are in the midst of a massive $1.1 billion-plus refurbishment and expansion program that Packer presumably believes will increase their returns significantly. Both casinos are adding substantial new gaming capacity.

Key Developments:

Sembcorp Marine has closed over $700m USD worth of deals in the last month and is still trading at SG$4.50

Sembcorp Marine's subsidiary Jurong Shipyard (JSPL) has secured orders of US$384 million for two turnkey jack-up rigs with options for another four jack-up rigs from Seadrill.

Sembcorp Marine has also secured an approximately S$351 million contract to convert the Aframax tanker, the MT Arc II (ex MT Arc), to a Floating Production Storage and Offloading (FPSO) vessel, to be renamed FPSO Petrojarl Cidade de Itajai, for Teekay Petrojarl Production AS.

About the Company

Sembcorp Marine Ltd. is an investment holding company engaged in the provision of management services. The Company operates in two segments: ship and rig repair, building and conversion, and ship chartering.

The Company’s wholly owned subsidiaries include Bulk Trade Pte Ltd, which is engaged in bulk trading; Dolphin Shipping Company Private Limited, which is engaged in ship owning and chartering; JPL Corporation Pte Ltd, which is engaged in investment holding; Jurong Integrated Services Pte Ltd, which is engaged in steel fabrication work, and Jurong SML Pte Ltd, which is engaged in ship building, ship repair and related services.

In March 2009, the Company acquired the remaining 30% interest in JPL Corporation Pte Ltd

Evolution of the Company

1963 • Incorporation of Jurong Shipyard as a joint venture between the Economic Development Board of Singapore and Ishikawajima-Harima Heavy Industries Co Ltd of Japan (IHI)

1968 • Incorporation of Jurong Shipbuilders

• Incorporation of Sembawang Shipyard

1976 • Merger of Jurong Shipbuilders with Jurong Shipyard

1987 • Public Listing of Jurong Shipyard Limited

1997 • Acquisition of Sembawang Shipyard Pte Ltd, along with its subsidiary company P.T. Karimun Sembawang Shipyard (Indonesia) (65%) and associate company Bohai Sembawang Shipyard (China) (50%)

1999 • Acquisition of SML Shipyard

2000 • Name change of listed entity from Jurong Shipyard Ltd to Sembcorp Marine Ltd

• Incorporation of Jurong Shipyard Pte Ltd, which operates as a separate brand name alongside other shipyards in Sembcorp Marine's network.

2001 • Acquisition of 50% of PPL Shipyard

• Acquisition of 35% of Maua Jurong (Brazil)

2002 • Acquisition of 20% of Cosco (Dalian) Shipyard (China)

• Acquisition of remaining 35% stake in PT Karimun Sembawang Shipyard from PT Primabahtera Indoshipyard (Total: 100%)

2003 • Acquisition of additional 35% of PPL Shipyard (Total: 85%)

• Disposal of entire shareholding in Bohai Sembawang Shipyard (China)

2004 • Acquisition of 30% of Cosco Shipyard Group (China), the enlarged group comprising five shipyards in the key coastal cities of Dalian, Nantong, Shanghai, Zhoushan and Guangzhou

2005 • Acquisition of Sabine Industries Inc., Texas, USA

2006 • Acquisition of SMOE Pte Ltd and PT SMOE Indonesia

• Acquisition of Sembawang Bethlehem Pte Ltd (SemBeth), including SemBeth's properties

2007 • Acquisition of 60% in SembMarine (Middle East) Pte Ltd in joint venture with Nasser Mohammed Al-Mukairish and Partners Company

• Strategic investment of 3.31% in Pipavav Shipyard Limited, India

• Acquisition of entire shareholding of Sabine Industries (renamed SembCorp-Sabine Industries, Inc.), comprising Sabine Shipyard (renamed SembCorp-Sabine Shipyard) and Sabine Offshore Services Inc. from PPL Shipyard (Total: 100%)

2008 • Strategic Alliance Agreement with Rio de Janeiro-based Mac Laren Shipyard to operate a shipyard in Brazil

2009 • Development of Integrated New Yard at Tuas View Extension

• Joint Venture with India's Kakinada Seaports Limited to form Sembmarine Kakinada Ltd in the East Coast of India

2010 • Development of Estaleiro Jurong Aracruz (EJA) in the Municipal of Aracruz, in the State of

Espirito Santo, Brazil

Portfolio

Awards

2009

• SIAS 10th Investors' Choice Awards - Most Transparent Company Runner-up Award 2009 (Non-Electronics Manufacturing)

• Patron of the Arts Awards 2009 - Arts Supporter Award 2009

• IR Magazine SEA Awards - Winner for Best Corporate Governance Award

2008

• SIAS 9th Investors' Choice Awards - Most Transparent Company Runner-up Award (Non-Electronics Manufacturing)

• Patron of the Arts Awards 2008 - Friend of the Arts 2008

2007

• SIAS 8th Investors' Choice Awards - Winner for Most Transparent Company (Non-Electronics Manufacturing)

• Singapore Corporate Awards - Best Annual Report 2005 Silver Award (Mainboard Listed Companies with Market Capitalisation > $500m)

2006

• SIAS 7th Investors' Choice Awards - Most Transparent Company Runner-up Award (Non-Electronics Manufacturing)

• Singapore Corporate Awards - Best Annual Report 2004 Bronze Award (Mainboard Listed Companies with Market Capitalisation > $500m)

2005

• SIAS 6th Investors' Choice Awards - Most Transparent Company Award (Non-Electronics Manufacturing) - Runner-up Award 2004

• Annual Report Awards - Best Annual Report 2002 Merit Award (Mainboard Listed Companies)

2003

• Annual Report Awards - Best Annual Report 2001 Commendation Award (Mainboard Listed Companies)

# of Estimates Mean High Low 1 Year Ago

SALES (in millions)

Quarter Ending Dec-10 2 1,119.50 1,197.00 1,041.99 --

Quarter Ending Mar-11 1 1,377.67 1,377.67 1,377.67 --

Year Ending Dec-10 24 5,266.05 6,095.88 4,549.69 5,394.74

Year Ending Dec-11 23 4,593.81 6,428.87 3,075.00 4,766.66

EARNINGS (per share)

Year Ending Dec-10 25 31.34 38.20 24.70 24.25

Year Ending Dec-11 24 26.23 36.40 19.60 21.17

LT Growth Rate (%) 2 0.65 10.00 -8.69 34.42

Sales and Earnings Figures in U.S. Dollars (USD)

VALUATION RATIOS

Company Industry Sector S&P 500

P/E Ratio (TTM) 12.02 52.57 19.70 17.51

P/E High - Last 5 Yrs. -- 0.07 0.37 19.64

P/E Low - Last 5 Yrs. -- 0.01 0.09 5.81

Beta 1.49 1.09 1.16 1.26

Price to Sales (TTM) 1.74 5.01 1.46 2.12

Price to Book (MRQ) 4.46 0.41 1.14 3.04

Price to Tangible Book (MRQ) 4.48 0.45 1.30 16.36

Price to Cash Flow (TTM) 10.25 37.60 18.88 15.79

Price to Free Cash Flow (TTM) 12.89 4.08 13.50 26.95

% Owned Institutions -- -- -- --

DIVIDENDS

Company Industry Sector S&P 500

Dividend Yield 2.47 1.68 1.24 1.70

Dividend Yield - 5 Year Avg. 3.26 0.78 1.18 2.50

Dividend 5 Year Growth Rate 15.48 6.66 8.97 -6.43

Payout Ratio(TTM) 29.68 26.47 11.90 36.45

GROWTH RATES

Company Industry Sector S&P 500

Sales (MRQ) vs Qtr. 1 Yr. Ago -26.69 3,758.68 439.90 11.02

Sales (TTM) vs TTM 1 Yr. Ago -5.37 9.83 1.21 6.39

Sales - 5 Yr. Growth Rate 33.25 27.26 7.49 9.95

EPS (MRQ) vs Qtr. 1 Yr. Ago 26.45 154.27 274.76 55.20

EPS (TTM) vs TTM 1 Yr. Ago 63.12 -- -- --

EPS - 5 Yr. Growth Rate 48.42 25.76 10.13 7.63

Capital Spending - 5 Yr. Growth Rate -5.43 27.08 14.16 7.65

FINANCIAL STRENGTH

Company Industry Sector S&P 500

Quick Ratio (MRQ) 1.04 0.39 1.11 0.83

Current Ratio (MRQ) 1.40 0.50 1.37 1.00

LT Debt to Equity (MRQ) 0.10 12.50 53.43 125.26

Total Debt to Equity (MRQ) 0.69 21.92 73.00 177.90

Interest Coverage (TTM) -- 0.04 0.39 32.01

PROFITABILITY RATIOS

Company Industry Sector S&P 500

Gross Margin (TTM) 20.21 26.59 13.83 32.93

Gross Margin - 5 Yr. Avg. 11.93 29.03 24.61 29.71

EBITD Margin (TTM) 18.95 -- -- --

EBITD - 5 Yr. Avg 12.29 17.48 13.21 18.88

Operating Margin (TTM) 17.27 14.29 5.23 --

Operating Margin - 5 Yr. Avg. 10.89 13.65 9.04 16.46

Pre-Tax Margin (TTM) 18.55 14.57 5.39 14.99

Pre-Tax Margin - 5 Yr. Avg. 10.91 13.78 9.12 16.02

Net Profit Margin (TTM) 15.40 12.97 4.05 11.51

Net Profit Margin - 5 Yr. Avg. 8.75 11.74 6.15 11.76

Effective Tax Rate (TTM) 17.01 12.27 17.97 20.36

Effecitve Tax Rate - 5 Yr. Avg. 19.85 27.00 110.86 25.63

EFFICIENCY

Company Industry Sector S&P 500

Revenue/Employee (TTM) 558,924 5,006,004 31,573,603 667,189

Net Income/Employee (TTM) 86,053 2,233,027 1,469,907 84,062

Receivable Turnover (TTM) 12.93 1.13 1.60 9.00

Inventory Turnover (TTM) 3.87 0.66 2.18 6.95

Asset Turnover (TTM) 1.06 0.04 0.24 0.56

MANAGEMENT EFFECTIVENESS

Company Industry Sector S&P 500

Return on Assets (TTM) 16.32 0.68 1.07 6.05

Return on Assets - 5 Yr. Avg. 10.13 4.39 4.21 5.78

Return on Investment (TTM) 42.58 0.82 1.62 7.72

Return on Investment - 5 Yr. Avg. 22.72 7.63 7.25 7.47

Return on Equity (TTM) 42.64 1.13 3.10 18.14

Return on Equity - 5 Yr. Avg. 25.35 13.85 10.40 9.86

Shayne Heffernan of Ebeling Heffernan prepared this report, Mr Heffernan holds a PhD in Economics serves as CEO of Heffernan Holding Inc and Co Founder of Ebeling Heffernan www.ebeling-heffernan.com

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