Flash: SembCorp Marine (SCMN.SI, SMBMF): Buy: In-Line Results but Stay Invested for Further Upside [Keppel mentioned]
7 May 2008 - 9 pages
* 1Q08 results - Revenue reached S$916m, (-4% yoy), and could have
been higher if not for timing differences in recognizing rig
building contracts (-13% yoy). This hampered revenue growth but is
partially offset by strong performance in ship conversion (13%
yoy) and repair (+16% yoy). Net profit reached S$91m (+24% yoy),
accounting for ~18% of our full-year estimate.
* Margin uptrend - Improved revenue mix and higher dollar value
per vessel repair (S$2.85m, +14% yoy) amid tight ship repair
capacity increased operating margins (8.7% vs. 7.8% in 1Q07).
Despite higher raw material costs and wages, management reiterated
its earlier guidance of yoy margin expansion in 2008. Clearly, SMM
is executing well, having hedged and locked in major costs items,
mitigating margin erosion.
* Prospects - Orderbook secured ytd is $400m, net orderbook
reaching S$6.6bn. SMM is upbeat on the O&M industry prospects and
we do not discount the likelihood net orderbook can continue to
increase on back of higher value contract wins. Ship repair
remained strong amid tight supply, thus enabled SMM to tap on
higher value repair works. With its recent alliance with Mac Laren
(Brazil), SMM has successfully restored its Brazilian footprint
and is well positioned to capitalize on the demand for deepwater
equipment.
* Slight premium - We see potential for further EPS surprise on
the back of higher margins. Stripping out Cosco's contribution,
the O&M segment now trades at ~16x 08E P/E, a slight premium to
Keppel, justified by its higher growth momentum.
[snip]
SembCorp Marine
Company description
SembCorp Marine is a leading global marine engineering group, specializing in
providing integrated solutions in ship repair, shipbuilding, ship conversion, rig
building and offshore engineering. Internationally renowned for its O&M
capabilities, SembCorp Marine is a global leader in converting tankers to
Floating Production Storage and Offloading vessels, Floating Storage and
Offloading vessels and Floating Production Units. It also has strong capabilities
in the proprietary design and construction of semi-submersible and offshore
platforms for the oil and gas industries. SembCorp Marine is globally
recognised as a leader in ship repair and a niche player in the design and
newbuilding of a wide variety of vessels. It offers one of the largest marine
engineering facilities through a global network of 11 strategically located
shipyards.
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