Sembcorp Marine

Sembcorp Marine

Postby winston » Thu May 08, 2008 9:17 am

SINGAPORE, May 8 (Reuters) - Sembcorp Marine may be in focus on Thursday after the world's second-biggest offshore rig maker posted a 24 percent rise in first-quarter net profit due to better margins from its rig-building and ship repair businesses.
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Re: Sembcorp Marine

Postby winston » Thu May 08, 2008 12:51 pm

From DBS:-

Q08 net profit for SembCorp Marine rose 24% to S$91.3m.

Turnover was down 4% yoy to S$916.1m. Sequential revenue and earnings should be higher in 2Q08 as we expect one semi-submersible and at least three jackups to hit the 20% milestone stage compared to only jackup in 1Q08.

Maintain Buy with an unchanged TP of S$4.50.
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Re: Sembcorp Marine

Postby winston » Thu May 08, 2008 1:03 pm

From Kim Eng:-

Sembcorp Marine (Rohan Suppiah, DID: 64321455)
Previous Day Closing price: S$3.96
Recommendation: Buy (maintained)
Target price: S$4.23 (maintained)

Another excellent quarter

SembCorp Marine (SMM) reported a 23.9% growth in 1Q08 net earnings to S$91.3m. This was within our expectations.

Turnover decreased by 3.9% to S$916.1m primarily due timing differences in the recognition of revenue from rig building contracts.

Shipbuilding revenue declined by 97% to just S$0.8m due to a deliberate scaling down of its shipbuilding activities in order to deploy resources for rig building and offshore.

Margins seeing no erosion

Elsewhere, shiprepair recorded a 16% rise in turnover, with only one additional ship repaired.

The average repair value per vessel rose by 14% to S$2.85m per ship, indicating that SMM is able to charge higher prices in the current market where capacity is tight, thereby mitigating any increases in costs such as steel and labour.

SMM’s overall EBIT margins showed no significant erosion, at 8.7%, versus FY07’s 7.7%.

Cosco a major contributor

SMM’s associate contributions also soared by 226%, solely on a sharp rise in contributions from its 30% stake in Cosco Shipyard Group, as well as its direct 5% shareholding in Cosco Corp.

We expect associate contributions to accelerate over the coming quarters, in line with our outlook and forecast for Cosco.

SMM has made no further specific mention in its recent forex issue - the remaining liability stands at around S$73m, possibly rising to S$100m after costs. There is still the potential upside of some or all of a S$308m related charge to be written back.

Revenue recognition stronger in upcoming quarters, TP at S$4.56

SMM’s own overall outlook continues to be strong, as it converts on its orderbook of S$6.6bn (S$401m secured year to date). SMM expects to deliver 8 jack-ups this year (vs 4 in FY07) and 2 semis (vs none in FY07).

Net profit forecast for FY08 is unchanged at S$453.1m.

We are maintaining our Buy recommendation, with a price target of S$4.56.

Not vested..
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Re: Sembcorp Marine

Postby winston » Thu May 08, 2008 4:06 pm

From Nomura:-

Our view
SMM saw a 24% y-y rise in 1Q08 net profit to S$91mn, with growth led by higher repair & conversion revenue and associate income. Earnings were in-line with our S$93mn estimate. Given the recent run-up, the share price implies 13.8% upside to
our S$4.51 fair value. We rate the stock a BUY (Strong Buy, previously).

Anchor themes
Our view that Singapore shipyards will maintain their edge and market share in the offshore exploration & production infrastructure build-up stands, and we expect SembCorp Marine to continue to add to its orderbook, which stood at a healthy
S$6.6bn as at end-1Q08. Demand for newbuilds, conversion and upgrades of offshore rigs, platforms & production systems will be buoyed by oil majors’ need to meet rising demand, curb supply volatility, replenish reserves and replace ineffective or aging equipment.
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Re: Sembcorp Marine

Postby winston » Thu May 08, 2008 5:17 pm

From Lim & Tan:-

Semb Marine’s Q1 results are broadly in line with expectations:
- net profit rose 24% to $91.3 mln, helped largely by contribution from Cosco (amounting to $31.4 mln up 202%); or
- +32% if the previous year’s one-off items ($5 mln over-provision for tax and $0.6 mln profit from asset sale) were excluded for fairer comparisons.

The issue of timing differences in the recognition of revenue was also cited by Semb Marine (relating to jack-up rigs) as did Keppel Offshore when they released their results 2 weeks ago.

The one big difference between the 2 is that unlike Keppel, Semb Marine bothers to provide a detailed account of the schedule of the various jobs they are currently working on (eg Q2 will see more initial revenue recognition in jack-ups),
thereby justifying management’s confidence the trend will be up in the quarters ahead.

Management also expressed confidence in securing new orders for 2011 and beyond, obviously on the back of the continuing rise in oil prices. Order book currently stands at $6.6 bln, inclusive of the $401 mln new orders received in Q1.

Highlighting the fact that all existing projects have received progressive payments is also reassuring in the current “climate”, or since Cosco shocked the market with the cancellation of a contract because a down payment was not obtained.

The forex dispute with Societe Generale and BNP remains outstanding.

We still like Semb Marine.
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Re: Sembcorp Marine

Postby winston » Thu May 15, 2008 5:06 pm

Sembcorp to privatise SembMarine ?

From Lim & Tan:-

With Utilities appearing to have lost its growth momentum, and only Marine still looking strong, it may be time for the board to revive the (failed) attempt to privatize Semb Marine.

(Note that the two foreign value funds, including Marathon Asset, which were reported to have succeeded in blocking the 2002 privatization effort, are no longer on Semb Marine’s Top 20 shareholders list.)
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Re: Sembcorp Marine

Postby winston » Thu May 22, 2008 2:55 pm

From DBS:-

Direct offshore play

Story: Petrobras plans to spend US$112bn up till 2012 to increase its oil and gas production, refining and distribution operations. This follows the recent discovery of 5bn to 8bn billion-barrel Tupi field, which is the largest offshore oilfield discovery in 30 years.

Specifically, Petrobras plans to order worth US$30bn of 40 oil drilling ships and drill platforms for delivery by 2017.

Point: While SembCorp Marine’s (SMM) y-t-d order wins of S$403m is lower than expected, we expect the group to be one of the leading contenders for the anticipated jobs from Petrobras, due to the presence of its joint venture yard in Brazil, and the existing strong business relationship with the Brazilian company.

We expect this to help add to SMM’s current outstanding order book of
S$6.6bn. We also believe that there are orders from other clients that are close to SMM. These are likely to be made up of semi-submersible, jackups, fixed platforms and FPSOs.

Indeed, before the big discovery in Tupi field, we believe that Petrobras is already looking to place an order for the P-62, a clone of P-54, worth US$900m to US$1bn in contract value. Hence, based on enquiries and projected demand for offshore equipment, we expect order wins for this year to pick up momentum.

There are no change to our earnings estimates, which stay at S$441m in FY08 and S$512m in FY09. Our assumptions of S$4bn in order wins for 2008 and 2009 are maintained for now.

Relevance: We have raised our fair value to S$4.85, mainly due to the upgrade to 20x FY09 PE for offshore construction (vs. 18x previously). Maintain Buy.
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Re: Sembcorp Marine

Postby winston » Wed May 28, 2008 5:04 pm

No longer vested.

From Morgan Stanley:-

Summary: We retain our Overweight-V rating and raise our price target to S$4.80, while our mid-cycle multiple of 18x 09e is unchanged. However, extended visibility of orders from Petrobras’ recent announcement and high oil prices could push the stock near its peak trading range of 20x, implying a near-term price as high as of S$5.40.

What’s New: Last week, we hosted management of SembCorp Marine (SMM) to meet with US-based clients. We came out more confident about the business fundamentals and less apprehensive about industry concerns.

Investor feedback: Investors are very bullish on the macro theme of oil services industry, yet concerned by rig builder’s limited operating leverage.

Positive takeaways from meetings include: Strong order momentum, order visibility from the Petrobras announcement, capacity expansion option, and revenue per unit increase due to input cost increase and margin improvement.

What’s changed: Our EPS estimate revision is based on lower earnings from 30% owned subsidiary COSCO and slower than expected order flow in 1H08 taking 2008 EPS lower by 9%, but our 2009 estimates move up based on higher-than-expected margin from improved
pricing power.

Risks do exist: SMM’s stock price is up 27% in the last three months, while the oil price is up 33% in the same period. The stock is trading at 18x forward earnings, above its long-term average. We believe lots of positive news has been factored in the price.
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Re: Sembcorp Marine

Postby winston » Thu May 29, 2008 11:20 am

From UOB-Kay Hian:-

SembCorp Marine

A whopping S$870m semi-submersible rig contract

Secures a whopping S$870m semi-submersible contract. SembCorp Marine’s subsidiary Jurong Shipyard has announced that it has a Letter of Intent (LOI) from Seadrill Ltd to build a Friede & Goldman Ex-D design, deepwater semi-submersible drilling rig (semi) at a turnkey contract value of
US$640m (S$870m). The rig is scheduled for delivery in Dec 2011.

We estimate ytd new contracts clinched by SMM total S$1.3b. We have assumed new contracts worth S$4.5b for 2008. As of end-1Q08, SMM’s O&M orderbook was S$6.6b. The latest semi contract would have raised SMM’s orderbook to S$7.5b.

New rig supply in 2008-10 could be reduced by delivery delays.
Greenfield shipyards that are building rigs for the first time are likely to face delays. Of the 91 jack-ups and 47 semis in the current global rig orderbook, 34% and 26% respectively are being built by Greenfield shipyards.

We are beginning to see execution difficulties at some of these shipyards and this will likely cause delivery delays. While the global credit crunch has curbed speculators’ investment appetite, interest from rig operators continues to be strong. Separately, SMM is a strong contender for Petrobras’ P62 FPSO contract, which is likely to exceed US$1b in value.

Margins to improve. The key positive note in SMM’s 1Q08 results was that improved margin had been sustained. EBITDA margin was 11.1%, higher than 1Q07’s 9.2% and comparable to 4Q07’s 11.8%. Low-margin rig contracts are gradually being completed and replaced by better-margin rig contracts. The value of jack-up contracts rose from US$110m apiece four years ago to US$200m presently while semi contract value has risen from US$280m to more than US$600m. While rising rig prices were due to higher equipment prices, shipyard margin also became fatter.

Re-rating to continue. We expect SMM’s re-rating, following the write-off of its exceptional forex losses in Feb 08, to continue. High oil prices of US$130/bbl augur well for oil & gas exploration and production (E&P) activities. Oil & gas production will naturally follow the exploration for oil. The pick-up in offshore exploration activities over the past three years, coupled with marginal fields made viable by high oil prices, will lead to a production system investment boom, the next cycle in the offshore E&P segment.

While our earnings forecasts remain unchanged, we upgrade our target price from S$4.60 to S$5.25 on a more aggressive sum-of-the-parts valuation of S$5.25 compared with S$4.67 previously. We now value SMM’s own shipyard business at 16x 2009 earnings (3-year PEG 1x) vs 15x previously and its 30% stake in COSCO Shipyard Group (CSG) at 20x 2009 earnings, in
line with our valuation of COSCO Corp (S)’s stake in CSG (previous valuation at 20% discount). Maintain BUY.
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SembCorp Marine

Postby purplecloud » Fri Jun 27, 2008 3:03 pm

By OCBC Investment Research

Testing support
- SembCorp Marine (SembMarine) has been trading within an uptrend channel since Feb 08. The pullback which occurred over the last 4-weeks is currently testing the support at the lower band of the uptrend channel.

- The formation of a reversal candlestick on the back of high volume 2 trading sessions ago and the oversold position of the stochastic indicator both suggest that SembMarine could be attempting to stage a rebound from current levels.

- Immediate support is set at S$3.88, which is near the 100-day moving average and the lower band of the uptrend channel. In light of the current market weakness, if this support fails to hold, SembMarine would fall towards the 2nd support at S$3.30, which was a key consolidation and reversal level in Aug 07 and recently between Mar and Apr 08.

- Resistance is set around S$4.52-4.73, which was a key consolidation and reversal level in Dec 07 and recently between May and June 08.
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