Sembcorp Marine’s thinning orderbook threatens to sink profits: analysts

Net orderbook is currently estimated at $4.7b.

Sembcorp Marine’s may have to race against the clock to nab more orders, as analysts say that the business’ rapidly depleting orderbook is putting pressure on profits.

According to a report by UOB Kay Hian, the company’s net orderbook was reported at $9.2b, but still included the deferred Sete Brasil and jack-up rig/semi projects. Stripping out those orders, net orderbook is estimated at $4.7b.

UOB Kay Hian noted that at its current orderbook burn rate, earnings face pressure to plummet by 2017 unless the business clinches several large orders.

In addition, cash inflow from project delivery in the second half of 2016 are expected to further weigh down net gearing.

“Sembcorp Marine expects to deliver five projects in 2H16, and as its revenue mix shifts towards more milestone payment-based projects, debt should decline. We had earlier estimated S$1.6b in cash inflow for SMM on delivery of its projects this year, which will lower net gearing to 96%,” UOB Kay Hian asserted.