SEMBCORP MARINE LTD (SGX:S51)
Sembcorp Marine - Impacted By Covid-19
- Deeper into the red in 1H20.
- Sembcorp Marine’s CEO takes 50% pay cut; senior management. 15%.
- Expect losses in foreseeable quarters.
Price action since last report
- Since our last SELL-rated report Sembcorp Marine - OCBC Investment 2020-06-09: Finally Some New Developments, Sembcorp Marine's share price has dropped from S$0.85 to S$0.455 (based on 15 July closing price) due to the rights issue proposal and potential de-merger from its parent, Sembcorp Industries (SGX:U96). This is not surprising given the highly dilutive rights issue of up to 10.46b new shares at an issue price of S$0.20 for each rights share.
- The issue price of S$0.20 is at a 31% discount to the theoretical ex-rights price of S$0.29 as calculated based on the 5-day VWAP of S$0.74 prior to the announcement.
Sembcorp Marine sinks further into the red in 1H20
- In Sembcorp Marine’s recent 1H20 results release, the group reported a 41% y-o-y drop in revenue to S$906m and suffered a net loss of S$192m compared to a net loss of S$6.8m in 1H19. This was mainly due to Covid-19 delaying execution of projects, higher costs recognized for rigs and floaters and specialized shipbuilding projects, and lower margin recognition from offshore platforms. This was partially offset by profit from repairs and upgrades and government grants related to Covid-19.
- Sembcorp Marine’s CEO has volunteered a 50% pay cut, while senior management will take a 15% salary reduction, middle management 10% and rest of the employees a 5% cut. Those earning less than $1.8k a month will not have any salary reduction.
Losses to continue into foreseeable quarters
- Looking ahead, we believe a recovery is still a long way off, given the challenging environment in the industry. Losses are expected to continue into the foreseeable quarters.
- As there were no significant new contracts secured in 1H20, net order book as at end June stood at S$1.9b. The repairs and upgrading business had outstanding orders for execution worth S$280m. Market focus, however, will be on the proposed rights issue and de-merger from parent Sembcorp Industries.
- Our fair value estimate of S$0.47 (0.55x book) excludes the impact of the rights; post-rights we estimate this would fall to around S$0.25.
- See Sembcorp Marine Share Price; Sembcorp Marine Target Price; Sembcorp Marine Analyst Reports; Sembcorp Marine Dividend History; Sembcorp Marine Announcements; Sembcorp Marine Latest News.
OCBC Research Team
OCBC Investment Research
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https://www.iocbc.com/
2020-07-16
SGX Stock
Analyst Report
0.47
DOWN
0.550
