Sembcorp Marine - RHB Invest 2019-09-02: Early Signs Of Order Win Recovery

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SEMBCORP MARINE LTD (SGX:S51)

Sembcorp Marine - Early Signs Of Order Win Recovery

• Maintain BUY with lower P/BV-based SGD1.63 Target Price, from SGD1.80, 43% upside.
• Sembcorp Marine announced it has won a raft of new projects valued at SGD400m, including engineering solutions for offshore gas and wind farm developments, and upgrades for cruise ships. Including SGD175m of new contracts secured in 1H19, we believe our assumption of SGD1bn new orders in FY19 is achievable.
• We forecast FY20 contract wins of SGD2.5bn, which should catalyse Sembcorp Marine's share price higher.

FPSO conversion project with Shapoorji Pallonji and Bumi Armada.

• SEMBCORP MARINE (SGX:S51) has signed agreements with JV companies of Shapoorji Pallonji and Bumi Armada to convert Ariake, a very large crude carrier (VLCC) into a floating production, storage and offloading (FPSO) unit. The work will be done at its flagship Tuas Boulevard Yard, with delivery scheduled in 2H21.

FSRU and FSU conversions, and FSRU upgrades.

• Three new gas projects have been added: conversion of LNG tanker Dwiputra into a floating storage and regasification unit (FSRU); conversion of former gas carrier LNG Flora into a floating storage unit (FSU); upgrades on FSRU BW Magna. All three are for delivery between end-2019 and Feb 2020.

Makeover of cruise ship and fabricating jacket foundations for wind farm.

• Sembcorp Marine will spearhead the makeover of Asuka II – Japan’s largest cruise ship – for NYK Cruises. This will be executed over 45 days from Jan 2020.
• Separately, Sembcorp Marine has a contract with Jan De Nul NV to fabricate 15 jacket foundations for the Formosa 2 Offshore Wind Farm (Taiwan’s largest offshore wind farm) – delivery by Dec 2020.

Contract wins positive for future earnings, but global concerns led to 9% cut in target price.

• Whilst the above-mentioned contracts will not have material impact on Sembcorp Marine’s FY19 for FY20F earnings recovery.
• Factoring in concerns on the US-China trade growth, we lowered Sembcorp Marine’s target FY20F 1.48x (0.3SD below 1.6x 5-year mean), from 1.64x previously.

Leng Seng Choon CFA RHB Securities Research | https://www.rhbinvest.com.sg/ 2019-09-02

SGX Stock Analyst Report BUY MAINTAIN BUY 1.63 DOWN 1.800