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SembMarine’s weak 2Q results lead to analyst downgrades; company stays tight-lipped on police raid at Brazilian unit

Jeffrey Tan
Jeffrey Tan8/1/2019 07:30 AM GMT+08  • 6 min read
SembMarine’s weak 2Q results lead to analyst downgrades; company stays tight-lipped on police raid at Brazilian unit
  Disappointing order book For 2QFY2019, SembMarine reported a net loss of $9 million. This was 85% lower than a net loss of $56 million in the same quarter last year. Revenue more than halved to $731 million from $1.63 billion previously. However,
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(Aug 5): Disappointing results, slow order momentum and a weak outlook by the management are among reasons why investors should stay on the sidelines or consider getting out of Sembcorp Marine. Another factor is the potential blowback from a Brazilian bribery investigation that could further pummel shares of the offshore and marine services provider.

Unsurprisingly, analysts have turned bearish on SembMarine’s prospects. CGS-CIMB’s head of research Lim Siew Khee -expects the company’s weak orders to translate into widening losses in 2H2019 and estimates an earnings before interest and tax margin of about 2.5% to 3.3% for FY2020 and FY2021.

She expects SembMarine to report losses of $71 million and $500,000 in FY2019 and FY2020, respectively. She has also downgraded her recommendation on the stock to “reduce” from “add”, and lowered its price target to $1.16 from $1.75 previously. “A negative outcome of the [Operation] Car Wash investigation, poorer-than-expected orders and impairment of [its] Brazilian yard are key de-rating catalysts,” writes Lim in a July 30 note.

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