Sembcorp Marine - OCBC Investment 2021-02-24: Remain Cautious


Sembcorp Marine - Remain Cautious

  • Sembcorp Marine reported S$582m net loss for FY20.
  • Actively tendering for projects.
  • Continue to see multiple headwinds for the company; losses likely to continue.

S$582m net loss for FY20

  • Sembcorp Marine (SGX:S51) reported a 47.6% drop in revenue to S$1.5b and a net loss of S$582m for FY20. Gross loss in FY20 was S$490m, compared to S$92m in FY19, mainly due to the COVID-19 pandemic delaying project execution, higher costs recognized for rigs and floaters and specialized shipbuilding projects, and inventories written down.
  • Ever since our last HOLD-rated report on 11 November 2020, Sembcorp Marine's share price has risen by about 16%.

Tendering for projects

  • With oil prices recovering since the March collapse, Sembcorp Marine has been in active discussions with customers on the resumption of activities, including final investment decisions (FID) on deferred projects. New opportunities are also opening up with an increase in tender activities since 3Q20.
  • Currently, Sembcorp Marine is actively tendering for more than 10 projects in the greener energy market segments, such as Renewable Energy and Gas Solutions. A similar number of tenders are also in progress for the Process Solutions segment (such as FPSOs and FPUs).

Losses likely to continue

  • Looking ahead, we believe a recovery is still a long way off, given the challenging environment in the industry. Losses are expected to continue.
  • As at end 2020, Sembcorp Marine's the net order book stood at S$1.82b. This comprises S$1.5b of projects under execution (with a total original contract sum of S$6.5b) and S$0.3b of ongoing repairs & upgrades projects.
  • See Sembcorp Marine Share Price; Sembcorp Marine Target Price; Sembcorp Marine Analyst Reports; Sembcorp Marine Dividend History; Sembcorp Marine Announcements; Sembcorp Marine Latest News.
  • We fine-tune our estimates and our fair value is adjusted from S$0.14 to S$0.145 (~0.5x book).
  • Sembcorp Marine's net debt to equity as at end December 2020 was 0.75x.
  • We continue to see multiple headwinds on low order book clarity and capex requirements. There remains the potential for impairments ahead, and while the financial position is less precarious following the rights issue, it is still tight and could limit the types of orders that the group can pursue.

OCBC Research Team OCBC Investment Research | 2021-02-24
SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.145 UP 0.14