Sembcorp Marine pops the champagne on $12.3b orderbook

Net profit surged 41%.

According to OSK DMG, SMM’s 4Q13 earnings of SGD182m were ahead of estimates due to higher revenue and a tax writeback. 

PBT was 9% ahead of forecast, while its operating margin rose to 11.1% in 4Q13 (3Q13: 10.1%). 

Here's more from OSK DMG:

We like SMM for its strong visibility from its SGD12.3bn orderbook, potential upside on margins, positive newbuild outlook and rising repair revenue.

Sembcorp Marine (SMM)’s 4Q13 net profit of SGD182m (+41% q-o-q, +9% y-o-y) was ahead of our and consensus estimates thanks to higher revenue recognition (+28% y-o-y) and a tax writeback. 4Q13 PBT was 9% ahead of our forecast, while operating margins improved to 11.1% in 4Q13 from 10.1% in 3Q13.

Its full-year FY13 operating margin was 11.7%. In 4Q13, SMM registered initial revenue recognition on a second Brazilian drillship, one semisub and two jackup rigs. It proposed a final dividend of SGD0.08/share, bringing FY13 dividends to SGD0.13 - which implies a net yield of 3.2%.

The company secured SGD4.2bn in new orders in 2013 and has an outstanding orderbook of SGD12.3bn. We see scope for operating margins to surprise on the upside from a more favourable orderbook mix comprising more PPL 400 jackup rigs, higher-than-expected drillship margins and rising ship repair work which carries a higher margin than newbuild projects.

New yards to boost newbuild and ship repair capacity. Its new yard in Tuas is operational and we expect stronger ship repair work from vessels delivered in 2008-09 that need to carry out their first special survey. It appears that its Brazilian yard is slightly delayed and will now be ready for operations in 2H14 vs its initial guidance of 2Q14.