Morningstar

Morningstar, Inc.

Equity Bottom-Up

Although no-moat Sembcorp Marine reported a net loss of SGD 74 million in 2018, the results were better than we and the market expected. In particular, the firm registered a net profit of SGD 6 million in the fourth quarter, largely attributable to margin recognition from newly secured production floater projects. We increase our fair value estimate to SGD 1.20 from SGD 1.18 after fine-tuning our model. Despite the turnaround, we believe Sembcorp Marine remains overvalued, as we think the…

Although we already assumed no-moat Sembcorp Marine, or SMM, would be loss-making in 2018, first-half 2018’s net loss of SGD 50.3 million versus net profit of SGD 42.2 million a year ago came in below our expectation. The disappointing earnings are largely attributable to the absence of disposal gain, decreased overall business activity, and the disposal loss of SGD 27 million from the sale of the West Rigel semisubmersible rig. However, we expect a sharp turnaround in 2019, when contributions…

No-moat Sembcorp Marine’s, or SMM’s, 86% year-overyear drop in first-quarter 2018 net profit to SGD 5.3 million was worse than our expectation. Moreover, excluding the effect of the adoption of a new accounting standard, the firm would be making a net loss of SGD 33 million. Although the sharp drop in earnings is partly due to the absence of any disposal gain, it also reflects the lack of operating leverage due to reduced activity. We reduce our 2018 earnings estimate to a net loss of SGD 36…

No-moat Sembcorp Marine’s parent, Sembcorp Industries Ltd, has announced that it has completed its strategic review, which includes the sale of some utility assets and plans to list its energy business in India. However, the review did not include any plans for Sembcorp Marine, which disappointed the market, as a premium had been priced in on expectation of potential privatization or divestment. Sembcorp Marine’s share price reacted negatively to the development, falling by more than 4%. We…

While the SGD 24 million loss from the sale of SembCorp Marine's West Rigel rig damps earnings, we regard the unloading of the rig to be positive as it strengthens the firm's financial position and improves its working capital. We think the sale reaffirms our assumption that SembCorp’s inventory turnover is quickening, and this will help strengthen its operating cash flow. Our fair value estimate moves up to SGD 1.30 from SGD 1.20, but we think SembCorp remains overvalued as we are less…

Singapore

Seatrium Ltd offers engineering solutions for the offshore, marine, and energy industries. The Company provides rigs and floaters, repairs and upgrades, offshore platforms, and specialized shipbuilding. Seatrium serves customers worldwide.

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