Sembcorp’s slow order momentum hopeless despite oil price recovery

Surplus and tight competition kept the orderbook sluggish.

Delivery deferments pose significant threats to the earnings of SMM, but compensation from customers are band-aiding the damage.

"Brazilian projects are likely to be pushed back as Petrobras has slashed its 5-year capex by 41% and production target by 30%. Transocean recently deferred delivery of the pair of drillships under construction at SMM's yard by two years," a report from DBS said.

Meanwhile, the marine group recorded a YTD win of $1.4bn propelled by a lucrative contract with Heerema Offshore Services to build the world's largest semi-submersible crane vessel.

"Key risks are sustained low oil prices which affect rig count and newbuilding activities, execution risks at protected markets especially Brazil and further deferments / cancellations," the report said.

"SMM’s orderbook had dwindled to S$10.9bn by end-Jun 15, from S$11.4bn in Dec-2015," the report added.