Sembcorp Marine - CGS-CIMB Research 2020-11-11: Execution Of Orders First Before New Ones

SEMBCORP MARINE LTD (SGX:S51) | SGinvestors.io SEMBCORP MARINE LTD (SGX:S51)

Sembcorp Marine - Execution Of Orders First Before New Ones

  • Sembcorp Marine’s yards are operating at pre-COVID-19’s full workforce capacity (c.20k). Sembcorp Marine remained in a loss in 3Q20 and guided for losses in 4Q20F.
  • Order book at S$1.78bn (-7% q-o-q) with c.S$0.33bn of new ship repair and upgrade contracts. Sembcorp Marine is tendering for > 10 projects in renewable energy.
  • Downside risk is capped with no funding risk but losses and lack of orders could limit share price outperformance. Reiterate HOLD on Sembcorp Marine; target price raised to S$0.14.



Almost at full capacity of 20k workforce

  • Sembcorp Marine (SGX:S51)'s yards activities resumed in early-July and are now operating at close to pre-COVID-19’s full workforce capacity (including sub-contractors) of 20k. Delivery dates for most of Sembcorp Marine’s existing projects have been rescheduled by 3-12 months although there has been no project cancellation. Therefore, we gather that Sembcorp Marine is focusing on resuming these projects instead of aggressively chasing new projects, albeit the bidding landscape has improved q-o-q.
  • Sembcorp Marine remained in a loss in 3Q20 and guided for losses in 4Q20F.


Cashing in on renewable energy projects

  • Sembcorp Marine’s order book is at S$1.78bn (-7% q-o-q) with c.S$0.33bn of new ship repair and upgrade contracts. The group delivered the Tangguh LNG modules in Jun 20, the Offshore Windfarm Jacket foundations for the Hornsea 2 project in Aug 2020 as well as started Tupi P-71 newbuild FPSO and FSU CNTIC VPower Energy.
  • Sembcorp Marine said that it is tendering for more than 10 renewable energy projects, including wind turbine vessels and high voltage transformers as well as gas solutions. Margins for renewable projects are better than conventional offshore projects where competition is stiff. However, the learning curve for some of the new gas projects may still be steep (margin pressure).

Increased working capital needs; reiterate HOLD






LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2020-11-11
SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.139 UP 0.129



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