Sembcorp Marine (SMM) reported a 11.4% YoY rise in revenue to S$1.05b and a 5% increase in net profit to S$118.7m in 1Q13, both accounting for about 20% of our full year estimates and in line with our expectations. Operating margin increased from 10.8% in 4Q12 to 13.7% in 1Q13, and the significant uptick could be partly because revenue recognition of the Sete Brasil drillship in the last quarter was not very significant. Management reiterated that enquiries remain healthy across the various business segments. SMM’s share price has underperformed the STI by about 15% YTD although there has been no change in the company’s fundamentals. In our view, investors seeking to hold a quality company for the longer term would find value in SMM. Maintain BUY with S$5.64 fair value estimate.
1Q13 results in line
Sembcorp Marine (SMM) reported a 11.4% YoY rise in revenue to S$1.05b and a 5% increase in net profit to S$118.7m in 1Q13, both accounting for about 20% of our full year estimates. This is in line with our expectations; 1Q figures also accounted for about 20% of the full year numbers in FY11-12. Meanwhile, what was surprising was a 55% fall in share of results of associates and JVs to S$6.2m in the quarter, due to poor performance from Cosco.
Operating margin recovers in the quarter
The increase in revenue was mainly due to higher revenue recognition from rig building activities. Operating margin increased from 10.8% in 4Q12 to 13.7% in 1Q13, and the significant uptick could be partly because revenue recognition of the Sete Brasil drillship in the last quarter was not very significant. Meanwhile, two jack-up rigs for Noble were recognized in the quarter and none of the semi-submersibles were recognized.
Optimistic on order flow
Management reiterated that enquiries remain healthy across the various business segments of ship repair, conversion, offshore platforms and rig building. Though pressure on margins remains due to stiff competition, we still see the group securing a good share of orders in certain niche areas. For instance, SMM is contending with Daewoo Shipbuilding & Marine Engineering to build two harsh environment CJ70 jack-ups for Maersk, according to Upstream.
Maintain BUY
After securing new orders worth about S$1.68b YTD (accounting for 42% of our full year estimate), the group’s net order book stands at S$13.6b with completion and deliveries till 2019. SMM’s share price has underperformed the STI by about 15% YTD although there has been no change in the company’s fundamentals. In our view, investors seeking to hold a quality company for the longer term would find value in SMM. Maintain BUY with S$5.64 fair value estimate.
Sembcorp Marine (SMM) reported a 11.4% YoY rise in revenue to S$1.05b and a 5% increase in net profit to S$118.7m in 1Q13, both accounting for about 20% of our full year estimates. This is in line with our expectations; 1Q figures also accounted for about 20% of the full year numbers in FY11-12. Meanwhile, what was surprising was a 55% fall in share of results of associates and JVs to S$6.2m in the quarter, due to poor performance from Cosco.
Operating margin recovers in the quarter
The increase in revenue was mainly due to higher revenue recognition from rig building activities. Operating margin increased from 10.8% in 4Q12 to 13.7% in 1Q13, and the significant uptick could be partly because revenue recognition of the Sete Brasil drillship in the last quarter was not very significant. Meanwhile, two jack-up rigs for Noble were recognized in the quarter and none of the semi-submersibles were recognized.
Optimistic on order flow
Management reiterated that enquiries remain healthy across the various business segments of ship repair, conversion, offshore platforms and rig building. Though pressure on margins remains due to stiff competition, we still see the group securing a good share of orders in certain niche areas. For instance, SMM is contending with Daewoo Shipbuilding & Marine Engineering to build two harsh environment CJ70 jack-ups for Maersk, according to Upstream.
Maintain BUY
After securing new orders worth about S$1.68b YTD (accounting for 42% of our full year estimate), the group’s net order book stands at S$13.6b with completion and deliveries till 2019. SMM’s share price has underperformed the STI by about 15% YTD although there has been no change in the company’s fundamentals. In our view, investors seeking to hold a quality company for the longer term would find value in SMM. Maintain BUY with S$5.64 fair value estimate.
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