Sembcorp Marine (SMM) reported a 2.4% YoY drop in revenue to S$1.3b and a 13.6% fall in net profit to S$105.9m in 1Q15, such that the latter formed only 21% of our full year estimates, below our expectations. New order flow remains slow to date, and there is still little progress on the Brazilian side - the amount outstanding from Sete Brasil has increased to S$160m as of end Dec. SMM is still in a relatively good position with its S$10.6b net order book, but we estimate that ~S$4.5b of this relates to the Sete Brasil drillship orders. With the recent rally in oil and gas stocks, we increase our for the O&M segment (ex-Cosco) from 11x to 12x, but as we roll over our valuations to blended FY15/16F earnings, our fair value estimate falls from S$2.95 to S$2.77. Maintain HOLD.
Soft 1Q15 results
Sembcorp Marine (SMM) reported a 2.4% YoY drop in revenue to S$1.3b and a 13.6% fall in net profit to S$105.9m in the 1Q15, such that the latter formed only 21% and 19% of ours and the street’s full year estimates, respectively. Ship conversion and offshore continued to post healthy revenue growth of 19.2% YoY, but ship repair saw a significant 36.5% fall to S$100m in 1Q15. As customers seek to conserve cash in a weak market, revenue per vessel was lower at S$1.2m vs. S$1.5m in 1Q14. Operating margin was 10.6% in the quarter vs. 11.1% in 1Q14.
S$56m of firm orders secured to date
Excluding ship repair contracts, SMM has received S$56m of firm orders to date vs our FY15F estimate of S$1.5b. It has also received a letter of intent for a large semi-sub crane vessel, but conversion to a firm order could take a few months. Meanwhile, given that Keppel Corp has received requests from customers for deferments in rig deliveries, it would be a surprise if SMM has not received any. Management would only comment that it is unable to make any statement for now.
Updates on Sete Brasil
The amount outstanding from Sete Brasil has increased to S$160m as of end Dec last year, and this figure is relatively stable as of end Mar, given the deliberate slowdown in construction for the drillships. Currently, about 82% of the first drillship has been completed, followed by 70% for the second, 51% for the third and 22% for the fourth. These projects remain cash positive.
FV lower at S$2.77
SMM is still in a relatively good position with its S$10.6b net order book, but we estimate that ~S$4.5b of this relates to the Sete Brasil drillship orders. With the recent rally in oil and gas stocks, we increase our P/E for the O&M segment (ex-Cosco) from 11x to 12x, but as we roll over our valuations to blended FY15/16F earnings, our fair value estimate falls from S$2.95 to S$2.77. Maintain HOLD.
Sembcorp Marine (SMM) reported a 2.4% YoY drop in revenue to S$1.3b and a 13.6% fall in net profit to S$105.9m in the 1Q15, such that the latter formed only 21% and 19% of ours and the street’s full year estimates, respectively. Ship conversion and offshore continued to post healthy revenue growth of 19.2% YoY, but ship repair saw a significant 36.5% fall to S$100m in 1Q15. As customers seek to conserve cash in a weak market, revenue per vessel was lower at S$1.2m vs. S$1.5m in 1Q14. Operating margin was 10.6% in the quarter vs. 11.1% in 1Q14.
S$56m of firm orders secured to date
Excluding ship repair contracts, SMM has received S$56m of firm orders to date vs our FY15F estimate of S$1.5b. It has also received a letter of intent for a large semi-sub crane vessel, but conversion to a firm order could take a few months. Meanwhile, given that Keppel Corp has received requests from customers for deferments in rig deliveries, it would be a surprise if SMM has not received any. Management would only comment that it is unable to make any statement for now.
Updates on Sete Brasil
The amount outstanding from Sete Brasil has increased to S$160m as of end Dec last year, and this figure is relatively stable as of end Mar, given the deliberate slowdown in construction for the drillships. Currently, about 82% of the first drillship has been completed, followed by 70% for the second, 51% for the third and 22% for the fourth. These projects remain cash positive.
FV lower at S$2.77
SMM is still in a relatively good position with its S$10.6b net order book, but we estimate that ~S$4.5b of this relates to the Sete Brasil drillship orders. With the recent rally in oil and gas stocks, we increase our P/E for the O&M segment (ex-Cosco) from 11x to 12x, but as we roll over our valuations to blended FY15/16F earnings, our fair value estimate falls from S$2.95 to S$2.77. Maintain HOLD.
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