5 catalysts that can usher in growth for Sembcorp Marine

Potential M&As in Singapore yards is one.

Although Sembcorp Marine posted a 28% earnings drop to $40m, there is nothing but hopes for it to redeem itself in the next few months, DBS Group Research said.

According to analyst Pei Hwa Ho, changes can step from Sembcorp Marine being a pure play to ride the oil price recovery.

"Oil price rebounding above US$60/bbl will stimulate E&P activities and thus rig demand, while rig attribution and cancellations will soothe the supply pressure and eventually bring the sector back to equilibrium," Ho explained.

Meanwhile, the group's sizeable new orders for non-drilling solutions, in particular Gravifloat’s modularised LNG terminal, as well as the conclusion of jackup sales and the reactivation of Sete’s projects, could likewise be of help in pushing Sembcorp Marine’s growth.

"SMM has seven outstanding jackup rig orders, which are all at advanced stages of construction. Besides the BOT Lease unit which will likely be delivered to its customer next year, SMM is in talks with several potential buyers for the five undelivered jackup rigs to financially distressed Perisai and Oro Negro, and one terminated rig by Marco Polo," Ho noted.

Lastly, potential M&A plays arising from a consolidation of Singapore yards will do its trick in boosting Sembcorp Marine's performance.

"A merger could make sense to further streamline their operations, achieve cost synergies and eliminate competition in the medium term," the analysts elaborated.