SEMBCORP MARINE LTD
S51.SI
Sembcorp Marine - Looking Forward To Floater Focus
- Although it has SGD5.3bn of orderbook in the bag, we believe Sembcorp Marine’s earnings for the next two years would remain unexciting, as we expect its drilling solution segment – which is exposed to the exploration value chain – to slow down.
- The company is concentrating on floating and offshore solutions, which offer much more resilient demand, as they are mainly used for the production value chain.
- Maintain NEUTRAL with a TP of SGD1.33 (1% upside), based on 10x FY17F P/E.
SGD5.3bn orderbook.
- Sembcorp Marine’s orderbook currently stands at SGD5.3bn, excluding Sete Brasil drillships which amounted to SGD3.1bn.
- YTD, Sembcorp Marine has secured SGD320m coming from its non-drilling solutions arm. Note that this is unchanged from its 1H16 new orders figure.
Concentrating on floaters.
- With its drilling solution business slowing down due to lower demand, Sembcorp Marine is concentrating on getting more orders for floating non-drilling solutions.
- Currently, the company has seven floater projects in various stages of completion, while it has two offshore platforms to be delivered in the next two years.
Positive cash flow.
- For 9M16, the company generated positive operating cash flow of SGD796m, reducing its net gearing to 1.03x from 1.11x end-1H16.
- We understand that 80% of its SGD5.3bn orderbook is based on progressive payment, with the remainder based on back-ended payment terms.
Maintain NEUTRAL with SGD1.33 TP, based on 10x FY17F P/E.
- With the results coming in below expectations, we reduce our FY16F-17F earnings by 10% and 13% respectively.
- The worse could be over for Sembcorp Marine but we expect earnings to continue to be unexciting in a low crude oil price environment, hence we maintain our NEUTRAL call.
- The key risk to our forecasts would be unexpected deferrals of jack-up rig projects.
Singapore Research
RHB Invest
|
http://www.rhbinvest.com.sg/
2016-10-26
RHB Invest
SGX Stock
Analyst Report
1.33
Down
1.510
