Sembcorp Marine - OCBC Investment 2018-07-23: Patience Needed

Sembcorp Marine - OCBC Investment Research 2018-07-23: Patience Needed SEMBCORP MARINE LTD SGX:S51

Sembcorp Marine - Patience Needed

  • Net loss in 2Q18.
  • Negative op profit till end FY18.
  • No interim div for 1H18.

Net loss of S$55.6m in 2Q18

  • Sembcorp Marine (SMM) reported a 150.8% y-o-y rise in revenue to S$1.63b but saw a net loss of S$55.6m in 2Q18, below ours and the street’s expectations. For 1H18, the group had a net loss of S$50.3m, but we note that this was partly due to a S$27m loss recognised from the sale of West Rigel.
  • Revenue was significantly higher in 2Q18 , a decrease of 24% compared with 1H17.

Negative operating profit to persist till end FY18

  • Overall business volume has remained low, resulting in operating losses of S$45m for 4Q17, S$33m for 1Q18 and S$29m for 2Q18.
  • Work volume for the foreseeable quarters, while improving, is expected to remain low, and the trend of negative operating profit will continue for the current financial year before improving thereafter.

Change in business mix; more time before significant revenue recognition

  • The majority of new orders so far have been for offshore production projects. This trend is expected to continue and Sembcorp Marine (SMM) is responding to an “encouraging pipeline of enquiries and tenders for innovative engineering solutions”.
  • Looking ahead, while improvement in E&P capex is projected to compressed with intense competition. 
  • No interim dividend was declared for 1H18.
  • We maintain our S$2.10 fair value estimate on SMM. (HOLD)

Low Pei Han CFA OCBC Investment Research | https://www.iocbc.com/ 2018-07-23
SGX Stock Analyst Report HOLD Maintain HOLD 2.100 Same 2.100