Sembcorp Marine (SMM) reported an 85.9% YoY fall in revenue to S$1.66b and a 12.3% increase in net profit to S$129.7m in 3Q13, within our expectations. Operating margin in 3Q13 was 10.1%; though on the lower side, this is still within management’s guidance of 10-13% for this year. With the commencement of operations in the new Tuas yard, ship repair revenue rose 34% YoY. After securing new orders worth about S$3.9b YTD (vs our full year estimate of S$4b), the group’s net order book stands at S$13.5b with deliveries extending till 2019. With the more conservative profit recognition stance adopted by management for at least this year, we lower our earnings estimates by 3-7% for FY13-14F. However, as we roll forward our valuations to FY14F earnings, our SOTP-based fair value estimate rises slightly from S$5.64 to S$5.68. Maintain BUY.
3Q13 results within expectations
Sembcorp Marine (SMM) reported an 85.9% YoY fall in revenue to S$1.66b and a 12.3% increase in net profit to S$129.7m in 3Q13, such that 9M13 revenue and net profit accounted for about 75% and close to 70% of our full year estimates, respectively. We judge the results to be within our expectations, as 1) gross profit margin in the quarter was lower partly due to conservative profit recognition of two products (well-intervention semi-sub rig and a harsh-environment unit) such that margins should be higher nearing completion, and 2) the new Tuas yard should see greater contribution in 4Q13. Operating margin in 3Q13 was 10.1% vs. 14.1% in 3Q12 and 13.0% in 2Q13; though on the lower side, this is still within management’s guidance of 10-13% for this year.
Five projects achieved initial recognition and higher ship repair revenue
The last quarter saw the progressive recognition of 12 projects in the rig building segment with five rig projects (one well-intervention semi-sub rig, one harsh environment semi-sub rig and three jack-up rigs) achieving initial recognition in 3Q13, bumping up this segment’s revenue to S$1.1b vs S$428m a year ago. Ship repair also saw a 34% increase in turnover to S$204m with the commencement of operations in the new integrated yard at Tuas on 5 Aug 2013.
Prospects remain bright
Customers of SMM continue to have positive comments on the outlook of the rig market in their latest earnings calls, and SMM’s management also expects demand from high spec and ultra-deepwater rigs to remain strong.
Maintain BUY
After securing new orders worth about S$3.9b YTD (close to our full year estimate of S$4b), the group’s net order book stands at S$13.5b with deliveries extending till 2019. With the more conservative profit recognition stance adopted by management for at least this year, we lower our earnings estimates by 3-7% for FY13-14F. However, as we roll forward our valuations to FY14F earnings, our SOTP-based fair value estimate rises slightly from S$5.64 to S$5.68. Maintain BUY.
Sembcorp Marine (SMM) reported an 85.9% YoY fall in revenue to S$1.66b and a 12.3% increase in net profit to S$129.7m in 3Q13, such that 9M13 revenue and net profit accounted for about 75% and close to 70% of our full year estimates, respectively. We judge the results to be within our expectations, as 1) gross profit margin in the quarter was lower partly due to conservative profit recognition of two products (well-intervention semi-sub rig and a harsh-environment unit) such that margins should be higher nearing completion, and 2) the new Tuas yard should see greater contribution in 4Q13. Operating margin in 3Q13 was 10.1% vs. 14.1% in 3Q12 and 13.0% in 2Q13; though on the lower side, this is still within management’s guidance of 10-13% for this year.
Five projects achieved initial recognition and higher ship repair revenue
The last quarter saw the progressive recognition of 12 projects in the rig building segment with five rig projects (one well-intervention semi-sub rig, one harsh environment semi-sub rig and three jack-up rigs) achieving initial recognition in 3Q13, bumping up this segment’s revenue to S$1.1b vs S$428m a year ago. Ship repair also saw a 34% increase in turnover to S$204m with the commencement of operations in the new integrated yard at Tuas on 5 Aug 2013.
Prospects remain bright
Customers of SMM continue to have positive comments on the outlook of the rig market in their latest earnings calls, and SMM’s management also expects demand from high spec and ultra-deepwater rigs to remain strong.
Maintain BUY
After securing new orders worth about S$3.9b YTD (close to our full year estimate of S$4b), the group’s net order book stands at S$13.5b with deliveries extending till 2019. With the more conservative profit recognition stance adopted by management for at least this year, we lower our earnings estimates by 3-7% for FY13-14F. However, as we roll forward our valuations to FY14F earnings, our SOTP-based fair value estimate rises slightly from S$5.64 to S$5.68. Maintain BUY.
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