Sembcorp Marine faces murky outlook, but not without reprieve

SINGAPORE (Aug 1): Brokerage houses DBS Vickers Securities, KGI Fraser and OCBC Investment Research are lowering their expectations of Sembcorp Marine’s (SMM) earnings in the next couple of financial years to come, after the Singapore-based drilling rig builder released weaker-than-expected 2Q16 results last week.

While DBS and KGI Fraser are keeping their “fully valued” and “hold” ratings on SMM at reduced price targets of $1.20 and $1.53 from target prices of $1.24 and $1.65 respectively, OCBC is maintaining its “sell” call on the group at a slightly lower fair value of $1.13 from $1.14.

SMM posted a 90% y-o-y plunge in net profit to $11 million in the second quarter this year while revenue dropped 25% to $908.5 million. The group’s earnings were mainly dragged down by a $35 million forex loss from receivables denominated with USD and GBP, as well as an $8 million impairment charge on the group’s investment in Cosco.

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