Singapore's rig building kings unlikely to get big jumps in order books

Order book base is already high.

According to OSK DMG, rig demand robust but stiff competition again the highlight. Rig builders reported earnings that were in line due to better-than-expected operating margins although revenue was slightly below forecast.

Meanwhile, company managements kept their long-term operating margin guidance of 10% to 13%. 

Here's mroe from OSK DMG:

Keppel (KEP)’s SGD13.1bn-strong order book and SMM’s SGD13.6bn in orders will keep both companies’ yards busy but it is unlikely that they would see significant jumps given the already high base. We see little upside to our TPs as rig-building earnings growth is largely flat.

Chinese shipbuilders to see steep EPS contraction on tough order book replenishment and normalizing margins. Cosco (NR) reported weaker results as the company struggled with new products and lower margin orders. Chinese yards have signaled their intention to get more offshore work to offset the weak ship orders but we believe the initial steep learning curve will result in thin profits on these orders.

AUSG, TGH’s numbers disappoint. AusGroup (AUSG) and Technics Oil & Gas (TGH) reported weak results and also saw steep drops in their orders backlog due to delays in project awards. We believe their stocks will de-rate on lower order visibility while lower operating leverage may weaken earnings in the upcoming quarters.

Superior growth from EZI, MTQ. EZI’s earnings soared 102% y-o-y due to higher charter income and its strengthening logistics unit in Australia. As we see room for re-rating, we lift our TP to SGD3.00. We also like MTQ, whose earnings surged 94% y-o-y after it bought Neptune Marine Services, and the better showing at its Bahrain oilfield service business.