Sembcorp Marine

UOBKayhian on 6 Nov 2014

FY14F PE (x): 14.4
FY15F PE (x): 13.9
Weaker operating margin. Sembcorp Marine (SMM) posted a net profit of S$132m for
3Q14 and S$386m for 9M14. 9M14 accounts for 69% of our 2014 forecast of S$556m.
Operating margin was weak at 10.0% for 3Q14 vs 11.5% for 2Q14 and 11.1% for 1Q14
because of the initial revenue recognition of two more drillships (for Sete Brasil) in
3Q14. Of the seven drillships for Sete Brasil, revenue from four units is now being
recognised. In addition, there was a forex loss of S$12.7m in 3Q14 vs a gain of
S$12.4m in 3Q13. Management expects 4Q14 to post higher earnings as the quarter
will benefit from three large upgrading projects (non-orderbook jobs) that come under
the shiprepair segment.
Cutting our target price from S$4.23 to S$4.00 which is based on 2015F PE of 15x. We
maintain our HOLD call on SMM.