Seatrium (formerly known as SembMarine)

[winston]

From Kim Eng:-

1. Sembcorp Marine – 3Q08 Results Review (Rohan Suppiah, DID: 64321455)
Previous Day Closing price: S$2.17
Recommendation: Hold (maintained)
Target price: S$2.40 (reduced from S$3.54)
Record quarter

Sembcorp Marine (SMM) produced another strong set of results with 3Q08 earnings up 73% y/y to $140.9m, and up 9% q/q. Turnover moderated slightly to $1.14bn from $1.17bn, but this is within expected variances of recognition, and specifically due to a significant recognition of the Petrobras P-54 contract in the previous corresponding period.

Not just about rigs
Higher operating margins were derived primarily from rig building and the shiprepair businesses. Associated contributions also rose 70%, primarily on the back of Cosco Corp’s strong showing. By revenue breakdown, rig-building dipped 2.7% to $631.4m while offshore and conversion revenue fell 6.9% to $285.2m. Repair revenue rose 11.3% to $210.7m – this segment has shown particular strength, with SMM having to turn away over 400 enquiries over the past year, versus the 205 vessels repaired year-to-date. SMM expects shiprepair to remain strong amid global tightness in yard capacity. SMM is currently looking at ways to improve yard efficiency and capacity in order to capitalise on this.

Orderbook to 2012
Net order book stands at S$9.9bn, extending to 2012. This includes new orders of S$5.5 billion secured year to date. SMM maintains that the fundamentals for offshore remain intact, and that the cancellation risk of its existing orders because of credit risk is mitigated by the majority of its customers being either national oil companies or operators with firm charter contracts.

Revising earnings on shiprepair strength, but at premium to peers
SMM’s 9M08 net profit at $360.5m already represents 77% of our previous forecast. However, our numbers have underestimated the strength of shiprepair demand, which we believe will also lead to stronger margins for the sector. We are raising our FY08 forecast by 4% to S$484.5m on the back of this. Despite this, SMM still continues to trade at a premium within the sector, at 8.6x FY09 PER. Its rebound off its recent low has also matched the broader sector, rather than from an improved fundamental outlook. We are therefore maintaining our Hold recommendation, with our SOTP target price revised to S$2.40, at a deserved premium to its peers.

[winston]

BNP aims to recover US$50.72m from Jurong Shipyard
By ANGELA TAN

SINGAPORE - The Court of Appeal made an order continuing the injunction granted by the Singapore High Court restraining BNP Paribas from applying to wind up Jurong Shipyard Pte Ltd (JSPL) on the basis of the statutory demand issued on 20 November 2007.

The continuation of the injunction is subject to JSPL furnishing security for the full amount of BNP Paribas' claim of US$50.72 million.

The security will be cancelled or returned to JSPL if BNP Paribas does not commence an action against JSPL for recovery of this amount within 12 weeks.

BNP Paribas said on Friday it expects in due course to issue proceedings in High Court for recovery of the debt and remains confident in the merits of its position.

In June this year, Sembcorp Marine subsidiary JSPL scored a critical victory in the High Court, by holding off a winding-up petition by major creditor BNP Paribas - in the wake of the high- profile forex trading scandal involving its former finance chief Wee Sing Guan.

This means that JSPL, which allegedly owes BNP Paribas the US$50.72 million as a result of the unauthorised trades carried out by Wee, will now be able to continue as a viable business, as it attempts to sort out its troubles. It is seeking to prove, in a court trial, that BNP Paribas knew Wee was acting outside his authority when dealing with the bank on those foreign exchange trades and that JSPL is not liable for the debt, as a result.

The saga began last October when JSPL disclosed that Wee had chalked up US$248 million in losses - a sum later finalised at US$303 million - by entering into unauthorised currency bets.

JSPL settled the losses with nine of the 11 banks involved. Of the two remaining banks, it paid Societe Generale US$198.9 million. That prompted BNP Paribas to serve a statutory demand on JSPL for the payment of US$50.7 million within 21 days. JSPL is contesting the claim, saying the demand is baseless and an abuse of the winding-up process.

[winston]

Not vested. From DMG:-

Sembcorp Marine: Don’t underestimate its value (BUY\S$2.05\Target S$2.49)
Serene Lim (62323897, [email protected])

Recent 3Q08 results showed improved operating efficiency. In SCM’s recent 9M08 report card, SCM’s turnover increased 8.5% to S$3.4b from S$3.2b in 9M07. Core operating profit margin (OPM), excluding forex gains/losses and bad debt allowances for 9M08 was 9.3%, 230bp higher than 9M07.

PATMI surged 50.1% to S$360.5m from S$240.2m in the same corresponding period. We believe that the core OPM is an indication of SCM’s improved operating efficiency through the years. Whilst OPM varies quarterly and is dependent on the product mix, we expect to see sustained core OPM going forward.

Our earnings forecasts have factored in slowing new order momentum. Owing to the weak credit climate and more stringent financing hurdles, we have revised our new orders forecast to S$2.0b (equivalent to a semi-submersible and five jack-ups/floating production units) and S$2.5b (equivalent to two semi-submersibles and four jack-ups/floating production units) in FY09 and FY10 respectively. SCM has secured two semi-submersibles and five jack-ups in 2007 as well as four semi-submersibles and six jack-ups in 2008.

From another angle, SCM’s intrinsic value could possibly exceed S$2.90.

• S$2.18 from repair and conversion projects - We perform a simple calculation on the net cash flow generated from the repair and conversion projects (assuming debt-free, capex equals depreciation and conservative OPM of 22%) and discount at the rate of 8%. Our simple arithmetic calculation shows that this counter-cyclical business division generating S$2b of revenue per year (to perpetuity) could possibly constitute S$2.18 (or 88% of our TP).

• S$0.72 from rigbuilding division - We run an analysis of this scenario in a similar fashion, assuming one semi-submersible and one jack-up to be delivered per year. We take both as individual annuity of net cash flow at OPM of 8-10% and discounted rate of 8%, deriving a combined NPV of S$0.72 per share. We believe our assumptions are not unreasonable, given that the management’s mid-term strategy is to deliver 2 semi-submersibles and 2 units of jack-ups/floating production units per year.

We believe the stretched-test for SCM’s worst case scenario would imply business activity constricted to only repair and conversion projects (assuming no new contracts secured – which we believe to be unrealistic) at an intrinsic fundamental value of S$2.18. However, we believe this is unlikely to be so, as SCM has progressed into an internationally-renowned rig-builder, just second to Keppel Corp.

We chose the conservative S$2.49 as target price, which is based on to sum-of-the-parts valuation:
1) P/E of 12x FY09 blended earnings for SCM’s rigbuilding, repair and conversion sectors;
2) Implied value of SCM’s 30% stake in Cosco Shipyard Group (with reference to the implied P/E of 3x FY09 EPS of our valuation in Cosco Corp)
3) 4.98% equity interest of Cosco Corp at Cosco’s TP of S$0.68.

[winston]

RESEARCH ALERT-Macquarie cuts Sembcorp Marine target

SINGAPORE, Nov 18 (Reuters) - Macquarie Research has cut its target price for shares of Sembcorp Marine to S$3.05 from S$5.20, but maintained an "outperform" rating on the stock, citing a poorer operating environment but a strong earnings outlook.

Sembcorp Marine's near-term earnings will remain robust and the firm is attractive from a valuation standpoint, analyst Ashwin Sanketh said in a client note.

"While the near-term share price outlook is murky, we believe investors will refocus on fundamentals once the dust settles, bringing to light the quality and resilience of Sembcorp Marine's earnings," Sanketh said.

[winston]

Goldman downgrades Keppel, Sembcorp Marine to sell

SINGAPORE, Nov 28 (Reuters) - Goldman Sachs on Friday cut its rating on Singapore oil rigbuilders Keppel Corp and Sembcorp Marine to "sell" from "hold", following Keppel's announcement on Thursday that customers may cancel three orders worth $871 million.

"We believe the latest headwind could be a major setback for investors attracted to the sector's relatively defensive earnings, previously backed by a perceived secured order backlog. This may no longer be the case," Goldman said in a report.

Goldman set a target price of S$3.40 for Keppel, below Thursday's last traded price of S$4.80, while its target for Sembcorp Marine is S$1.00 against the closing price of S$1.77.

[iam802]

Monthly chart.

Currently, trading at around 1.51

Kumo bottom is at 1.53

High possibility that it will be breached.

[blid2def]

Wah so steady, hold out for so long, the monthly chart - only in Aug then the Chikou pierce the price.

One of the things I like to look for these days, are reversal candles in kumo or at kumo edges. Seems like there's one there in Nov, but whether it works or not is a different thing.

[durio]

seems like bear-bull equal power for now .. go sideways?

[winston]

Not vested. Frm BNP:-

• Negative sentiment in the oil industry is part of the malaise caused by the credit crisis and not oil fundamentals.
• Lower oil prices are kicking out energy alternatives and ensuring demand sustainability through cost deflation.
• Outlook for SMM remains positive despite possible order cancellation; TP maintained at SGD2.50 (12x 2009 P/E).

Lower not low oil prices
Credit crisis not oil crisis
We believe it is reasonable to question the general outlook for the oil industry following the recent news about potential order cancellations at Keppel Corp. Regarding its peer, SMM, we are concerned if the offshore orders would decline drastically and coupled with order cancellations would decimate the order books. To address these questions, we look into what is driving the potential order cancellation.

Seadrill – poor corporate finance not oil price victim
Seadrill, a client of SMM’s, is facing difficulties in getting financing for some of its offshore orders with SMM. This is resulting in a potential
order cancellation by Seadrill. Analysis of Seadrill’s financials gives us a better picture of the underlying situation. Seadrill’s P&L and cash flow
are good, indicating strong underlying business fundamentals. For 3Q08, net profit increased 211% y-y to USD69m. Operating cash flow
stood at USD730m (up 12% y-y). It was poor corporate finance decisions that led to difficulties. Net gearing in 3Q08 was 163%, up from
122% q-q. There are also other factors working against it – total return swaps, aggressive off balance sheet financing and large equity
investment stakes.

Cost deflation – the opening act for sentiment recovery
Oil prices now declined for the fifth month since its high of USD147/bbl in July 2008 and yet rig utilisation and day rates are still strong. Our
positive argument for SMM is dependent on the recovery of overall market sentiment and not earnings. Also, lower oil prices at USD50-60/bbl are not only sustainable for oil producers, it ensures that costs for most economic activities will be lower in 2009. We believe cost deflation will be the first step in market sentiment recovery. Lower oil prices will not only keep demand alive but also keep alternative energy out, and make it easier for producers to undertake long-term exploration decisions. This in turn will ensure SMM stays sustainably busy.

Valuation presents opportunity; maintain BUY
SMM continues to trade well below the historical period of 1997 – 2003. Pegged at 12x 2009 P/E, our target price remains at SGD2.50. The
dividend yield is attractive at levels above 10%.

[iam802]

Chart review for SembMarine

1. Broke 1.65 support on Nov 28

2. Continue to fall and broke support at 1.49

3. The fall lose strength on Dec 2 as can be seen by the first short black candle body near 1.4

4. Dec 3, trading remains narrow and same as previous day, suggesting a possible reversal.

5. Today, SembMarine has rebound and is trading slightly higher. Immediate resistant will be at 1.49