To Lim, investors may still be disappointed at the deeper-than-expected loss despite the group’s previous guidance that its loss for the 1HFY2021 may be wider than the losses posted in the FY2020.
On this, she has slashed her earnings per share (EPS) estimates for the FY2021 by 239%. Her EPS estimates for the FY2022 and FY2023 have also been reduced by 145% and 10% respectively.
Without the merger with Keppel O&M, SembMarine’s gross loss could persist till FY2023, she says in a July 30 report.
Meanwhile, Lim sees that the group should see easing staff cost provision pressures in the 2HFY2021, thereby requiring less provision. However, that does not imply the group’s return to profitability in the 2HFY2021 as SembMarine highlighted that it foresees insufficient revenues to cover its fixed overheads.
In her report, Lim has not identified any catalysts to the counter’s share price. Conversely, key risks include an increase in impairment of assets in its yards in Brazil and Singapore as well as cost overrun.
UOB Kay Hian analyst Adrian Loh has maintained his “hold” recommendation with an unchanged target price of 12.4 cents, which equates to a price-to-book (P/B) of 0.51 times.
“The company is currently trading at a 43% discount to its past 5-year average P/B of 0.89 times which we view as warranted given the bearish backdrop of a lack of new orders from the offshore and marine sector, difficulty in obtaining an optimum level of workforce for its Tuas shipyard, and prospects for losses to continue into 2HFY2021,” writes Loh in a July 30 report.
Calling the 1HFY2021 loss “shocking” as it stood 11% higher than the loss posted in the FY2020, Loh says the only “mild highlight” in SembMarine’s results were the zero project cancellations year-to-date (y-t-d).
“Clearly, it will be critical for the company to successfully raise the much-needed $1.5 billion via its rights issue,” writes Loh. “Apart from that, SembMarine management also talked about over 10 active tenders that it currently has for 10 renewable solutions, “multiple projects” within the FPSO/FSO/FPU segment as well as pre-Final Investment Decision engineering work for the deepwater Cambo field west of Shetland, United Kingdom.”
SembMarine’s offshore platforms were the only bright spot in its 1HFY2021 results with a 128% y-o-y increase in revenue to $296 million, notes Loh.
“Three of the notable offshore-platform projects were related to offshore wind farms with [around] 34% of the company’s net orderbook related to green energy solutions,” he says.
On its manpower issues, SembMarine’s management, in an analyst briefing, revealed that there were no new workers from South Asia in the 1HFY2021 due to quarantine and travel constraints.
“Going forward, it said that it will try to source labour from other countries instead in order to improve its operating activities in 2HFY2021; however the crucial piece of the puzzle remains a successful rights issue in 3QF2021,” he adds.
Loh has, too, slashed his earnings estimates for the FY2021; he has increased his full-year loss estimates to $963 million from a loss of $189 million previously.
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His estimates for the FY2022 and FY2023 remain unchanged for the time being.
“We highlight that the company expects to continue to incur losses in 2HFY2021 as revenues remain well short of overhead-cost coverage, and according to management comments during the analyst briefing, it currently does not foresee further provisions for the business in the near term.”
Catalysts, to Loh, includes the successful raising of $1.5 billion via its rights issue; new orders for rigs, offshore installations or fabrication works; as well as mergers or joint ventures with other shipyards.
The tightening of inbound travel rules for Singapore, thereby crimping SembMarine’s access to labour, is listed as yet another catalyst to the counter’s share price, according to Loh.
As at 1.19pm, shares in SembMarine are trading 0.7 cent higher or 6.5% up at 11.4 cents or 0.3 times P/B, according to UOB Kay Hian’s estimates.
Photo: SembMarine
