Headwinds hound SembMarine despite massive US$1b order win

Operating issues at its yards are key concerns.

Sembcorp Marine recently landed a massive US$1b semi-submersible crane vessel construction contract from Heerema Offshore, but RHB Research warns that headwinds continue to hound SembMarine’s key shipyards.

“While this massive order takes SembMarine well ahead of key peer Keppel Corp in terms of YTD order wins, we remain concerned about: i) its lower operating margins, ii) ballooning costs and operating issues at its new Brazil yard and iii) lackluster repair operations at the new Tuas yard,” RHB Research said.

“While some investors may like SembMarine as a pure-play on the depressed oil & gas sector, we note its higher valuations and lower yield vs. Keppel Corp, and we prefer the latter’s diversified conglomerate structure which should shelter its operations from the weakness in the oil & gas market,” the report added.