Sembcorp Marine (SMM) reported a 38.1% YoY rise in revenue to S$1.38b and a 27.0% fall in net profit to S$167.1m in 4Q12, bringing full year revenue and net profit to S$4.43b and S$538.5m, respectively. Excluding one-off items such as foreign exchange losses and disposal gains, core net profit of S$562m was in line with our expectations. Operating margin fell from 14.1% in 3Q12 to 10.8% in 4Q12, mainly due to lower margins from new design rigs, and a higher proportion of procurement in the business mix. The group is seeing healthy enquiries for semi-submersible rigs and even drillships. SMM has secured new orders worth S$900m YTD, accounting for 20.3% of our full year estimate. Net order book is also strong at S$13.6b with deliveries till 2019. Maintain BUY with S$5.84 fair value estimate, based on 16x blended FY13/14F earnings.
FY12 results in line
Sembcorp Marine (SMM) reported a 38.1% YoY rise in revenue to S$1.38b and a 27.0% fall in net profit to S$167.1m in 4Q12, bringing full year revenue and net profit to S$4.43b and S$538.5m, respectively. Excluding one-off items such as foreign exchange losses and disposal gains, core net profit of S$562m was in line with our expectations. Operating margin fell from 14.1% in 3Q12 to 10.8% in 4Q12, mainly due to lower margins from new design rigs in the last quarter (first drillship achieved initial recognition with more than 20% completion), as well as higher proportion of procurement in the business mix (procurement generally has lower margins than engineering and construction). We also understand that management was also conservative in the profit recognition of the jack-up rig for Noble that was affected in last year’s accident.
Striving to increase productivity
With respect to potentially higher labour costs in the future, the group has embarked on initiatives to increase productivity such as improving processes with the help of mechanization. Management is also looking at ways to outsource certain work to its regional yards. Finally, SMM will also have the opportunity to re-align certain processes at its new integrated yard at Tuas, which should achieve full commercial operations by 2H13. Ship repair, conversion and offshore capacity is expected to nearly double from the current 1.9m dwt.
Enquiries for harsh environment semis and… drillships
The group is seeing healthy enquiries for harsh environment rigs, especially semi-submersibles. Encouragingly, SMM is also receiving enquiries for drillships, and we think that the enquiries may be for orders outside of Brazil. Should such an order materialize, it would reflect well on SMM’s efforts to widen its product range. The group has secured new orders worth S$900m YTD, accounting for 20.3% of our full year estimate. Net order book is also strong at S$13.6b with deliveries till 2019. Maintain BUY with S$5.84 fair value estimate, based on 16x blended FY13/14F earnings.
Sembcorp Marine (SMM) reported a 38.1% YoY rise in revenue to S$1.38b and a 27.0% fall in net profit to S$167.1m in 4Q12, bringing full year revenue and net profit to S$4.43b and S$538.5m, respectively. Excluding one-off items such as foreign exchange losses and disposal gains, core net profit of S$562m was in line with our expectations. Operating margin fell from 14.1% in 3Q12 to 10.8% in 4Q12, mainly due to lower margins from new design rigs in the last quarter (first drillship achieved initial recognition with more than 20% completion), as well as higher proportion of procurement in the business mix (procurement generally has lower margins than engineering and construction). We also understand that management was also conservative in the profit recognition of the jack-up rig for Noble that was affected in last year’s accident.
Striving to increase productivity
With respect to potentially higher labour costs in the future, the group has embarked on initiatives to increase productivity such as improving processes with the help of mechanization. Management is also looking at ways to outsource certain work to its regional yards. Finally, SMM will also have the opportunity to re-align certain processes at its new integrated yard at Tuas, which should achieve full commercial operations by 2H13. Ship repair, conversion and offshore capacity is expected to nearly double from the current 1.9m dwt.
Enquiries for harsh environment semis and… drillships
The group is seeing healthy enquiries for harsh environment rigs, especially semi-submersibles. Encouragingly, SMM is also receiving enquiries for drillships, and we think that the enquiries may be for orders outside of Brazil. Should such an order materialize, it would reflect well on SMM’s efforts to widen its product range. The group has secured new orders worth S$900m YTD, accounting for 20.3% of our full year estimate. Net order book is also strong at S$13.6b with deliveries till 2019. Maintain BUY with S$5.84 fair value estimate, based on 16x blended FY13/14F earnings.
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