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Sembcorp Marine – Time To Buy After Recent Selldown?
Tradeable, Tradeable Ideas | 16 October 2014
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By: Raymond Leung
Articles (142) Profile
  • Sembcorp Marine’s share price has fallen about 16 percent over the past 52 weeks. Analysts are beginning to see value emerge with current price levels.
  • The company recently announced that its first drillship is on schedule despite a nearly 6 month delay.
  • Low valuations, a 4 percent yield and limited downside to its business margins are amongst the chief reasons to invest in the company now.

Analysts' updates on Sembcorp Marine

Sembcorp Marine’s (SMM) price has fallen by about 16 percent over the past 52 weeks. The most significant of the drop came within the last few weeks.

The sharp fall in oil prices is the main factor for the extremely poor performance by SMM. Furthermore, the market worries for SMM with regards to the execution risk of its new drillship.

Based on news reports from two weeks ago, a heavy-lift vessel (Black Marlin) was seen ballasting down SMM’s first drillship, The Arpoador. SMM has also confirmed that the new vessel has left Singapore for Brazil while reiterating that it is on schedule despite the six months delay in departure.

SMM's Arpoador being readied for transportation to Brazil. Photo credit: Andre Korver – Dockwise Shipping B.V.

This gave the market some relief as there were worries about the execution risk for the new vessel. These risks have been greatly reduced as SMM built approximately 70 percent of its components in Singapore.

The remainder of the vessel will be built in the new and inexperienced Brazilian shipyard which has caused some concerns among investors previously.

Analysts from OCBC Research viewed these as positive developments for the counter and upgraded SMM to “Buy” call. They gave SMM a target price of $4.18 in view of its low valuations due to the recent selldown, 4 percent yield, and limited downside to its margins.

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Trained in fund management, Raymond is familiar with shares and various investment vehicles.

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Sembcorp Marine  1.710 +0.020 +1.18%   
Business: Co is a leading global marine & offshore engineering group. [FY18 Turnover] rigs & floaters, repairs & upgrades, offshore platforms (98.8%), ship chartering (1%), others activities (0.2%).

Insight: Feb-19, FY18 revenue jumped 61.1% to $4.9b attribu... Read More


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