Continue reading this on our app for a better experience

Open in App
Home Capital Broker's Calls

Sembmarine's continuing losses prompt analysts to lower forecasts, target price

Jeffrey Tan
Jeffrey Tan • 2 min read
Sembmarine's continuing losses prompt analysts to lower forecasts, target price
Analysts are turning even more cautious on Sembcorp Marine, following wider-than-expected loss in FY2019.
Font Resizer
Share to Whatsapp
Share to Facebook
Share to LinkedIn
Scroll to top
Follow us on Facebook and join our Telegram channel for the latest updates.

SINGAPORE (Feb 21): Sembcorp Marine’s (Sembmarine) wider-than-expected loss in FY2019 ended Dec 31, coupled with an expectation of further losses this year, have prompted analysts to turn more cautious.

RHB Securities has now forecast a FY20 net loss of $48 million, compared to its previous forecast of $41 million in earnings.

This comes on the back of a cut in lower gross profit margin expectations, it says.

CGS-CIMB has now factored in an earnings before interest and tax margin loss of 2.2% in FY20.

“We were disappointed that the previously guided $48 million per annum cost savings from accelerated depreciation will only partially be reflected in FY20,” CGS-CIMB head of research Lim Siew Khee writes in a note dated Feb 20.

The brokerage also notes that some project delays could occur as a result of a supply chain disruption by the novel coronavirus outbreak.

This includes the floating production storage and offloading hull due for delivery to Technip by the end of this year, it says.

Meanwhile, OCBC Investment Research has forecast a loss after tax and minority interest of $74 million.

It says that Sembmarine’s overall business volume is like to remain low ahead for most of its segments.

This excludes repair and upgrading activity, which continue to improve, underpinned by IMO regulations that require installation of ballast water treatment systems and gas scrubbers, it adds.

Still, Sembmarine could do better in FY21.

RHB believes the increasing order book trend, particularly for green solutions, should help to bring the company back to profitability by then.

Sembmarine has a current net order book of $2.44 billion, excluding the Sete Brasil drill ships.

“Our earnings model assumes FY20 contract wins of $1.9 billion and end-FY20 net order book of $2.4 billion,” RHB analyst Leng Seng Choon writes in a note dated Feb 20.

Both RHB and CGS-CIMB cut their target price for the stock to $1.45 and $1.20, respectively. OCBC also reduced its fair value for the stock to $1.23.

RHB has maintained its “buy” call. CGS-CIMB and OCBC kept their “hold” recommendation.

As at 2.37 pm, Sembmarine was down 2 cents or 1.7% at $1.18, with 1.3 million shares changed hands.

Loading next article...
The Edge Singapore
Download The Edge Singapore App
Google playApple store play
Keep updated
Follow our social media
© 2024 The Edge Publishing Pte Ltd. All rights reserved.