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Singapore shipyards should be getting the jitters from these threats

Not from Chinese peers with 12% share.

According to CIMB, it thinks that the recent rig incidents are timely reminders of the risks involved in rig-building.

Here's more from CIMB:

Chinese state-owned shipbuilder, Dalian Shipbuilding Industry Offshore Co (DSIC) has been notified by Friede & Goldman Marketing (F&G) to suspend the construction of Prospector Offshore Drilling’s jack-up rigs’ jacking system for the time being, pending testing.

Prospector Offshore has four jack-up rigs being built by DSIC, based on F&G JU-2000E designs. The F&G notice follows an incident involving Noble’s JU-3000N design jack-up being built by SembMarine.

The above incidents reinforce our view that investors should stick with established shipyards. DSIC is the most successful Chinese rig builder, commanding 12% of the global market.

Worries that Chinese yards may steal Singapore’s market share may not be relevant as aspiring yards could be exposed to high risks of slippage.

However, we see threats from established Korean yards in semi-subs, drillships and large-scale structures (FLNG, FPSO).

Following Yangzijiang’s recent jack-up contract, we pre-emptively caution against turning over-bullish on Chinese shipbuilders venturing into rig building.

We are also concerned about Cosco Corp’s stretched balance sheet (1.02x net gearing) and negative operating cashflows to fund offshore projects.

Despite its recent incident, we still regard Sembcorp Marine (Neutral, TP: S$5.00) as a quality yard, having successfully delivered 35 rigs since 2007.

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