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Singapore's SembCorp Marine hits all-time high on earnings expectations
13 July 2007
Singapore's SembCorp Marine Ltd hit an all-time high Friday, riding on the enthusiasm for the oil- and gas-related industry, because of the strong flow of orders the company is getting and the greater visibility of its earnings.
At 12.16 pm here (0416 GMT), SembCorp Marine had added 20 Singapore cents or 3.81 percent at 5.45 dollars, off an all-time high of 5.50 dollars, with 7.12 million shares traded. An analyst at a local brokerage, who declined to be identified, expressed bullishness about the company because of the amount of orders it has got and expectations that it will get even more.
The value of SembCorp Marine's order book is now 9.1 bln sgd, with completion and deliveries sceheduled until 2010. Of this amount, 4.5 bln dollars-worth of contracts were secured this year.
"They already have more orders than last year," said the analyst. "If you look at the long-term earnings, it supports the price you are paying [for the stock]." The analyst said Sembcorp Marine also stood to benefit from bigger contributions from its stake of six percent in a peer, COSCO Corp (Singapore) Ltd.
from DBSV this morning!!!!!!!!!!!
China kicker, rolling forward to FY09 earnings
��
FY08 by 0.5% and 9.0% on the back of higher earnings from Cosco
Shipyard Group for FY07 and FY08 and marginally raising our
order win assumptions for FY07 to S$5bn from S$4.8bn previously;
(ii) introducing FY09 estimates; and (iii) rolling forward our
valuation to FY09 earnings.
Story: We are (i) raising SMM?s earnings estimates for FY07 and��
there is good visibility to revenue ? excluding shiprepair, 96%, 75%
and 45% of revenue in FY07, FY08 and FY09 respectively are
already covered by confirmed orders. We are forecasting new
order wins of S$5bn in FY07, and S$3.8bn each in FY08 and FY09.
Point: We believe that the cycle has more room to run and��
rising to S$7.90 based on FY09 earnings. Given the strong visibility,
our target price is based on FY09 earnings. Maintain Buy with a
raised target price of S$7.90 based on 20x shiprepair earnings, 18x
rigbuilding and conversion earnings, 25x earnings from Cosco
Shipyard Group and valuing SMM?s 6.7% stake in Cosco Corp using
target price of S$6.10. Assuming that SMM continues with its 75%
dividend payout ratio, yield is still attractive at 3.1% for FY07 and
4.3% for FY08 in spite of the strong run up in share price.
Relevance: Our fair value is S$6.80 based on FY08 earnings,YTD order wins now amount to S$4.5bn and we expect it to hit S$5bn for
this year.
earnings. Excluding shiprepair, 96%, 75% and 45% of revenue in FY07,
FY08 and FY09 respectively are already covered by confirmed orders. Any
new contracts for a jack-up may be able to fill a 2009 delivery slot whereas
new orders for the high environment jackup rig can only be delivered
from 2010 whereas an order for a semisubmersible can tie in for a 2011
delivery slot.
Current order book is S$9.1bn, providing good visibility toAssociate stake in Cosco Shipyard Group has seen two rounds of earnings
upgrades over the past one week.
Cosco Shipyard Group (CSG) and a 6.7% stake in SGX-listed Cosco Corp
(COS SP, Buy, TP S$6.10). This week, Cosco Corp?s net earnings have been
upgraded by 8% and 7% and FY09 earnings have been introduced which
will lead to net earnings rising 35% in FY09 driven by strong order flows
at CSG. As a percentage of net profit, contribution from Cosco Shipyard
Group is expected to account for 25%, 30% and 35% of SMM?s net profit
over FY07F-FY09F from only 16% in FY06.
SMM has a 30% stake in Cosco Corp?sCatalysts.
contracts YTD, realistically we do not expect the same momentum to carry
on for the rest of the year. As such, incremental new orders exceeding
S$500m is likely to surprise on the upside. Our assumptions for margins are
conservative ? we are looking at EBIT margins of 7.7% in FY07, 8% in
FY08 and 8.3% in FY09 ? and these could also surprise on the upside
Hi mirage,
Since my last post, SembMar has indeed topped out. Its TA charts still look the same to me. Not much changes.
Quote:
Shares of SembCorp Marine, the world's second-largest offshore oil rig maker, rose as much as 2.1 percent to S$4.90 with 3.1 million shares traded after Citigroup raised its target price for the stock to S$6.88 from S$5.20.
"Group visibility is not only strong for offshore equipment, but ship repair also appears robust with its dock space fully utilised with bookings of more than four months ahead," Citigroup analyst Kevin Chong said in a research note on Thursday.
Below is what The Edge wrote for Sembmarine under "Hot Stocks" section on offshore sectors. For those who are interested to read, i have typed it out.
Sembmarine - Set for a correction
"SembCorp Marine ($5) has moved beyond anyone's wildest dreams. By now, with an almost relentless upcombin from $3.80 ownards, both short and medium term indicators are severely overbrought. Hence, prices are likely to have hit a ceiling last week before they retreated. Stohastics has turned own, as has RSI. But with ADX rising strongly and the DIs positively placed, any retreat should be temporary. support appears at $4.80, a breakout level. On the candlestick chart, teh formation is a bearish engulfing pattern. If prices move swiftly up this week, past $5.20, that would negate the engulfing pattern. The jury could be out on this one as RSI is weakening".
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p/s: I am holding this for long term for the next few years, so I am not so bothered by the news.
| 5.200 | +0.420 | 29,188 | 97 | 5.150 | 5.200 | 274 | 5.250 | 4.860 | MFG |