Sembcorp Marine (SMM) reported a 31.5% YoY fall in revenue and a 48.1% drop in net profit in 3Q12, such that 9M12 net profit accounted for 60% of ours and the street’s full year estimates. 3Q12 saw only one jack-up rig achieve initial revenue recognition, along with a lower-than-expected margin of 14.1% in the quarter. Still, we expect 4Q12 to be a better quarter. Looking ahead, offshore E&P spending continues to remain buoyant, and enquiries remain healthy, according to management. SMM has secured orders worth a total of S$9.1b YTD, accounting for 96% of our FY12F order win estimate. This brings its net order book from S$5.1b as at end 2011 to a record high of S$12.1b. After tweaking our earnings estimates and rolling forward our valuations to FY13, our fair value estimate slips from S$6.09 to S$5.84. Maintain BUY.
Soft 3Q12 results
Sembcorp Marine (SMM) reported a 31.5% YoY fall in revenue and a 48.1% drop in net profit in 3Q12, such that 9M12 net profit accounted for 60% of ours and the street’s full year estimates. 3Q11 saw the resumption of revenue recognition of the Songa Eclipse semi-sub rig which resulted in lumpy earnings; we estimate that revenue in 3Q12 actually increased 17% YoY if we were to exclude it. On a nine-month basis in which comparison would be more meaningful, revenue inched up by 3% YoY while net profit dropped by 29.0%. We were expecting a pick-up in earnings in 3Q12 as more projects achieve initial revenue recognition stage. However, revenue from only one jack-up rig was recognized in 3Q12. The operating margin of 14.1% in the quarter, though higher than 2Q12’s 13.1%, was also lower than our 15% assumption.
Enquiries remain healthy
Looking ahead, offshore E&P spending continues to remain buoyant with discoveries in frontier areas and the traditional deepwater basins. According to management, enquiries continue to be healthy, although competition remains keen. As for ship repair, demand for the group’s big docks remains strong as its regular customers provide a stable base-load. Meanwhile, construction work at the new integrated yard at Tuas is also on track.
96% of FY12 new order win target secured
SMM has secured orders worth a total of S$9.1b YTD, accounting for 96% of our FY12F order win estimate (FY13F: S$4b). This brings its net order book from S$5.1b as at end 2011 to a record high of S$12.1b, allowing for earnings visibility at a time when general corporate earnings outlook remains murky. Despite this, we think potential orders may be announced by the end of this year and if not, early next year. After tweaking our earnings estimates and rolling forward our valuations to FY13, our fair value estimate slips from S$6.09 to S$5.84. Maintain BUY.
Sembcorp Marine (SMM) reported a 31.5% YoY fall in revenue and a 48.1% drop in net profit in 3Q12, such that 9M12 net profit accounted for 60% of ours and the street’s full year estimates. 3Q11 saw the resumption of revenue recognition of the Songa Eclipse semi-sub rig which resulted in lumpy earnings; we estimate that revenue in 3Q12 actually increased 17% YoY if we were to exclude it. On a nine-month basis in which comparison would be more meaningful, revenue inched up by 3% YoY while net profit dropped by 29.0%. We were expecting a pick-up in earnings in 3Q12 as more projects achieve initial revenue recognition stage. However, revenue from only one jack-up rig was recognized in 3Q12. The operating margin of 14.1% in the quarter, though higher than 2Q12’s 13.1%, was also lower than our 15% assumption.
Enquiries remain healthy
Looking ahead, offshore E&P spending continues to remain buoyant with discoveries in frontier areas and the traditional deepwater basins. According to management, enquiries continue to be healthy, although competition remains keen. As for ship repair, demand for the group’s big docks remains strong as its regular customers provide a stable base-load. Meanwhile, construction work at the new integrated yard at Tuas is also on track.
96% of FY12 new order win target secured
SMM has secured orders worth a total of S$9.1b YTD, accounting for 96% of our FY12F order win estimate (FY13F: S$4b). This brings its net order book from S$5.1b as at end 2011 to a record high of S$12.1b, allowing for earnings visibility at a time when general corporate earnings outlook remains murky. Despite this, we think potential orders may be announced by the end of this year and if not, early next year. After tweaking our earnings estimates and rolling forward our valuations to FY13, our fair value estimate slips from S$6.09 to S$5.84. Maintain BUY.
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