SEMBCORP MARINE LTD (SGX:S51)
Sembcorp Marine - Show Me The Orders
- Sembcorp Marine's wider-than-expected losses in 2H20, due largely to lower activity level and impairments.
- Low orderbook of S$1.5bn and ongoing losses are concerning.
- Recovery hinges on uptick in order flows, especially with regard to the cleaner, renewable solutions.
- HOLD for more clarity on turnaround; target price of S$0.14.
Sembcorp Marine reported wider-than-expected losses in FY20.
- Sembcorp Marine (SGX:S51) reported a net loss of S$588.3m, worse than market expectations of ~S$300m. The underperformance was due largely to impairment & provisions amounting to S$144m made in 2H20 and low activity level due to rescheduling and lack of new orders.
Net orderbook declined to S$1.51bn as of end-2020
- Sembcorp Marine's net orderbook declined to S$1.51bn as of end-2020, from S$2.44bn a year ago, as there was a lack of major new orders secured in 2020 apart from repair & upgrade jobs worth ~S$0.31bn to be delivered in 2021, which are typically excluded from its net orderbook due to their quick turnaround.
- Sembcorp Marine continues to benefit from the new IMO regulations on ballast water treatment and fuel sulphur reduction. Delivery for most existing projects has been pushed back by 3-12 months, though there were no cancellations during the pandemic.
Higher project tenders.
- Some of the projects have been deferred due to the COVID-19 situation but with oil prices recovering from the March collapse, there been active reviews of deferred projects. In addition, new orders visibility has also improved. Sembcorp Marine is actively tendering for projects, especially in the greener energy market segments such as Renewable Energy and Gas Solutions. It also continues to pursue tenders for the Process Solutions segment (such as FPSOs, FSOs and FPUs).
Going greener.
- Sembcorp Marine has proactively diversified into the cleaner, greener and renewable energy solutions in keeping with the global shift towards a cleaner and greener energy mix. It is moving further into sustainable product solutions in gas / renewable space including wind farm installation vessels, LNG vessels, LNG-powered vessels, LNG-battery hybrid tugs, electrification-ready midwater and harsh environment solutions and ocean living solutions, as well as import and export terminals, and liquefaction and regasification solutions.
Strengthened balance sheet.
- The successful completion of Sembcorp Marine’s S$2.1bn rights issue in Sept-2020 has strengthened its liquidity position and balance sheet, to put it in a better position to weather through the current severe industry downturn. Post issuance, BVPS stood at 29 cents with net gearing being lowered from 1.9x as of end-2019 to 0.8x as of end-2020.
- See Sembcorp Marine Share Price; Sembcorp Marine Target Price; Sembcorp Marine Analyst Reports; Sembcorp Marine Dividend History; Sembcorp Marine Announcements; Sembcorp Marine Latest News.
- It seems fair for Sembcorp Marine to trade at 0.4-0.5x (that translates to 12-15 cents) P/BV till more evidence of operational improvement and sector recovery emerges.
- Nevertheless, on the trading front, Sembcorp Marine's share price could benefit from the rotational interests into cyclicals and M&A activity with Keppel Corp (SGX:BN4) continuing to explore M&A opportunities for its O&M arm.
Pei Hwa HO
DBS Group Research
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https://www.dbsvickers.com/
2021-02-25
SGX Stock
Analyst Report
0.14
SAME
0.14
