Compelling reasons why Sembcorp Marine can't be knocked off top spot

Keppel's accumulated EBIT margin is 12.7%.

According to Maybank Kim Eng, SMM offers better share price upside. The Street generally agrees on margin upside opportunities in 2013.

Keppel’s delivery of a record number of jackups would see it outperform SMM in terms of absolute operating margins this year. However, Keppel has often been seen as the ‘better’ executor and we think SMM has been overly penalised. 

Here's more from Maybank Kim Eng:

While we agree that SMM’s Brazil drillship orders would bring down overall margins, we have argued that the impact would not be as bad as imagined.

As subsequent data points prove our thesis, we believe that there would be moderation of such overly pessimistic expectations. The relative underperformance of SMM against Keppel offers a higher share price upside potential.

Keppel O&M’s accumulated historical margins are not superior to SMM’s. The general impression is that Keppel has better execution as its operating margin historically outperformed SMM’s in more instances.

However, when we compare the accumulated operating profit for 9 years, Keppel’s accumulated EBIT margin was 12.7%, compared to SMM’s 12.5%, non-conclusive that one was better than the other.

We believe that this phenomenon was due to the timing recognition of how the two companies book in and release provisions and risk contingencies.