Macquarie.com Tel: 65-6601-0289
Login
English
About Macquarie
Home
Learn More
Tools & Charts
Market data
News & Documents
Seminars
Supporting brokers
About us
News & Documents Newsletter- Today's highlight- End-of-day Insights- Overnight Market Wrap- SubscribeReuters newsDocumentsApple iPad mini Winners
Today's highlight
Today's Highlight keeps you up to date with the latest happenings in markets, including stock research from Macquarie, important news flows, upcoming announcements and economic updates.
29 Apr 15 SembMarine – MER publishes report with $4.00 target price
28 Apr 15 DBS result analysis – MER targets S$22
27 Apr 15 China’s rally to continue with help from regulators?
24 Apr 15 SGX – Target price increased to $10
23 Apr 15 MER targets another 21% upside to Keppel Corp
22 Apr 15 More room for HSI rally?
|<<<12345...39>>>|
SembMarine – MER publishes report with $4.00 target price
29 Apr 15
Share
Code Name Type Expiry Exercise Price
AJMW SembMar MBeCW160104 CALL 04 Jan 16 3.00
AIPW SembMar MBeCW151102 CALL 02 Nov 15 3.30
SembCorp Marine fell 2.3% yesterday after releasing their first quarter 2015 (1Q15) results on Monday evening which were only 19% of Bloomberg’s analyst polls. Nevertheless, Macquarie Equities Research (MER) in their research report published on Monday 27 April maintained their Outperform rating on the stock with a 12-month target price of $4.00. Here’s why…
SembMarine reported S$106m profit, down 13% year-on-year (YoY) due to lower revenue booking from rig building and lower ship repair revenues in the quarter. Pressure from weak ship repair orders and Brazil payment delays has started to show.
Impact
Lower ship repair revenues key reason for the miss: Ship repair revenues came in the lowest since 2009 at only S$100m versus a run-rate of S$150m per quarter in 2014. MER believes the ticket size of vessels has gone down significantly in 2015, thus hurting revenue recognition and margins.
EBIT margin of 10.6% due to S$248m of Brazil drillship revenue booking plus lower ship repair revenues: MER’s calculations suggest that 19% of SMM’s 1Q15 revenues of S$1.3bn came from Brazil Drillships which hurt the margins. In addition, lower ship repair revenues also limited the upside.
Net debt increases as Brazil pressure mounts: Net debt increased to S$908m (29% net debt / equity) vs S$709m in 4Q14 (24% net debt / equity). MER believes it is due to the stoppage of Brazil payments from November ’14.
Key things to look forward to
Orders from “non-rig” segment like fixed platforms: SembMarine did not declare the value of the Semi-sub crane order that it received in the quarter which MER believes is in the range of around S$450m. However, large fixed platform orders will be key to this year’s order inflow in the absence of rig orders, in MER’s view.
Order book of S$10.6bn at the end of 1Q15 with 55% in Drillships: 42% of this order book is in Brazil. Drillship execution is key to SMM’s revenue booking over next 12-18 months in MER’s view.
42% order book in Brazil; Deliveries could be pushed out amidst payment delays: SembMarine said that while Sete Brasil sorts out its payment issues, they are positive on no order cancellations but the deliveries could be pushed out (from current schedule of 2015 to 2019). MER’s calculations suggest that SembMarine has S$4.5bn outstanding order book / payment from Sete Brasil.
Action and recommendation
MER has an Outperform rating on SembMarine – target price S$4.00. MER has however reduced earnings by 3% each for next 2 years on slightly lower margins.
Stock should continue hovering around S$2.90-3.20 levels until substantial orders come in: Quarterly revenue booking varies a lot between quarters for shipyards and thus is not indicative of future quarterly revenues in MER’s view. SembMarine’s stock performance would entirely depend on its capability to win ‘non-rig’ orders in 2015E, in MER’s view.