Forget provision charges, here’s the bigger picture for Singapore O&M investors

SINGAPORE (Feb 17): CLSA is turning positive on Keppel Corporation and Sembcorp Marine (SMM) , upgrading its former “sell” ratings on both stocks to “buy” with the respective target prices of $7.60 and $2 on the belief that Singapore’s offshore & marine (O&M) sector is set to recover this year.

The brokerage and investment firm notes that 4Q16 is “likely to mark the tail end of impairment charges” which have been the source of key investor concern over the past year.

“With $1.2 billion provisions made by Keppel and Sembcorp Marine (SMM) over the past two years, both yards are well positioned, each with $4 billion orderbook backlogs, as they exit the cyclical trough. The market has yet to price in orderbook strength,” comments lead analyst Low Horng Han in a Thursday report.

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