SEMBCORP MARINE LTD
S51.SI
Sembcorp Marine - Nobody Saw This Coming
- SembMarine delivered a shocking SGD537m loss in the final quarter, with large provisions taken on the Sete Brasil drillships and other rigs under construction plus a share of associates’ losses, with Cosco posting an equally outsized loss – this takes full-year PATMI to a SGD290m loss (SGD384m before provisions according to management).
- Maintain NEUTRAL with a SGD1.33 TP (from SGD1.81, 9% downside) based on 10x FY16F P/E.
SGD609m of provisions.
- Sembcorp Marine (SembMarine) took SGD329m of provisions on the Sete Brasil drillships and SGD280m for its other rigs under construction.
- The magnitude of the provisions takes us and the street by surprise and probably represents a highly-conservative approach to the assets’ net realisable values.
Dividend cut to 6 cents.
- The company declared a final dividend of 2 cents, bringing the full-year sum to 6 cents, equivalent to c.33% of pre-provision PATMI.
- We continue to forecast 6 cents in dividends going forward, which are 45%/45%/39% of FY16F-18F PATMI, close to the 48-50% ratios of FY12-14.
- Net gearing hit 103%, though management remains sanguine on this issue, expecting upcoming deliveries and lower working capital requirements to bring this to manageable levels.
- Given that the company still requires SGD450m (FY16F) and SGD250m (FY17F).
Prefer Keppel Corp.
- While a 4.1% yield may tempt income investors, we see further headwinds, with core earnings likely falling to the SGD280m level for FY16F-17F.
- Keppel Corp (KEP SP, BUY, TP: SGD8.08) provides a stronger 6.8% yield, with earnings enjoying diversification benefits from its property and other divisions.
Lee Yue Jer CFA
RHB Research
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http://www.rhbinvest.com.sg/
2016-02-16
RHB Research
SGX Stock
Analyst Report
1.33
Down
1.81
