Sembcorp Marine (SMM) posted a 27% YoY rise in revenue to S$1.34b and a 3% increase in net profit to S$122.48m in 1Q14, both accounting for about 20% of our full year estimates, We judge this to be largely in line with expectations, mainly due to the lumpy nature of revenue recognition in rigbuilding. Looking ahead, we would continue to monitor closely the outlook of the ultra-deepwater and deepwater floater markets, which have seen a softening in dayrates. We have lowered our P/E for SMM (based on blended FY14/15F earnings) in our SOTP valuation from 16x to 15x due to the softer floater market, resulting in a lower fair value estimate of S$4.90 (prev. S$5.26). However, given the upside potential of about 24% (includes 3.2% dividend yield), we maintain our BUY rating on the stock.
1Q14 results largely in line
Sembcorp Marine (SMM) posted a 27% YoY rise in revenue to S$1.34b and a 3% increase in net profit to S$122.48m in 1Q14, both accounting for about 20% of our full year estimates, We judge this to be largely in line with expectations, mainly due to the lumpy nature of revenue recognition in rigbuilding (revenue +33% YoY, -33% QoQ) which accounted for 60% of total turnover in the quarter. Group operating margin at 11.1% was similar to that in 4Q13, but lower than the 13.7% registered in 1Q13.
Ship repair disappoints, but small impact on total revenue
In 1Q14, ship repair revenue saw a mere 1% YoY increase in ship repair revenue to S$158m in the quarter (-3% QoQ) despite the opening of the new integrated yard at the end of last year. As such, we pare our revenue estimates for this segment by ~19% to S$771m for FY14. However, this only has a small impact on our group revenue estimates (drops by ~3%), as ship repair accounts for about 12% of total revenue.
Softer ultra-deepwater and deepwater floater segment
Meanwhile, day rates in the ultra-deepwater and deepwater floater markets have softened, and though we are seeing more mixed views from long-time customers of SMM, there is undeniably a more muted outlook for these segments in general. However, sentiment in the jack-up market remains relatively strong. YTD, SMM has been able to secure S$1.6b worth of new orders (vs. our FY14F estimate of S$4b), bringing its net order book to S$12.9b.
Lowering fair value to S$4.90
We have lowered our P/E for SMM (based on blended FY14/15F earnings) in our SOTP valuation from 16x to 15x due to the softer floater market, resulting in a lower fair value estimate of S$4.90 (prev. S$5.26). However, given the upside potential of about 24% (includes 3.2% dividend yield), we maintain our BUY rating on the stock.
Sembcorp Marine (SMM) posted a 27% YoY rise in revenue to S$1.34b and a 3% increase in net profit to S$122.48m in 1Q14, both accounting for about 20% of our full year estimates, We judge this to be largely in line with expectations, mainly due to the lumpy nature of revenue recognition in rigbuilding (revenue +33% YoY, -33% QoQ) which accounted for 60% of total turnover in the quarter. Group operating margin at 11.1% was similar to that in 4Q13, but lower than the 13.7% registered in 1Q13.
Ship repair disappoints, but small impact on total revenue
In 1Q14, ship repair revenue saw a mere 1% YoY increase in ship repair revenue to S$158m in the quarter (-3% QoQ) despite the opening of the new integrated yard at the end of last year. As such, we pare our revenue estimates for this segment by ~19% to S$771m for FY14. However, this only has a small impact on our group revenue estimates (drops by ~3%), as ship repair accounts for about 12% of total revenue.
Softer ultra-deepwater and deepwater floater segment
Meanwhile, day rates in the ultra-deepwater and deepwater floater markets have softened, and though we are seeing more mixed views from long-time customers of SMM, there is undeniably a more muted outlook for these segments in general. However, sentiment in the jack-up market remains relatively strong. YTD, SMM has been able to secure S$1.6b worth of new orders (vs. our FY14F estimate of S$4b), bringing its net order book to S$12.9b.
Lowering fair value to S$4.90
We have lowered our P/E for SMM (based on blended FY14/15F earnings) in our SOTP valuation from 16x to 15x due to the softer floater market, resulting in a lower fair value estimate of S$4.90 (prev. S$5.26). However, given the upside potential of about 24% (includes 3.2% dividend yield), we maintain our BUY rating on the stock.
No comments:
Post a Comment