Hot stock: SembMarine shares fall after lower-than-expected Q2 earnings

SEMBCORP Marine shares sank on Monday, following its second-quarter results released after trading hours on Friday which saw the group post a net loss of S$55.6m.

By 1.40pm, its shares fell by 5.1 per cent or 10 Singapore cents, to S$1.86. About 7.2 million shares worth S$13.4 million changed hands.

The counter closed at S$1.96 on Friday, opening at S$1.88 on Monday. It has fallen steadily since then.

OCBC analyst Low Pei Han believes that "patience is needed" for SembMarine to sustain recovery in new orders.

She said: "The group's transformation efforts to move up the value chain has resulted in new business opportunities but they require significant time and effort in project co-development with potential customers before orders are secured."

She maintained the house's S$2.10 fair value estimate on SembMarine.

CIMB analyst Lim Siew Khee kept her "add" rating for SembMarine with a target price of S$2.52.

To stay relevant, SembMarine is transforming itself to take on large scale engineering, procurement and construction (EPC) projects and offering nimble compacting solutions to customers, she noted.

It is also scouting for new technology and intellectual property to widen its service offering, as well as preparing for the rig recovery. The latest acquisition of Sevan Marine cylindrical rigs is a case in point, she added.

However, a cash call to fund sizeable EPC projects is a key risk, she said.

SembMarine's Q2 net loss of S$55.62 million was mainly attributed to the realised loss from the sale of a semi-submersible rig and lower overall business volume.

It was a reversal from a net profit of S$5.12 million for the same quarter last year.

Loss per share for the three months to June 30 was 2.66 Singapore cents, compared with earnings per share of 0.24 cent a year earlier.

Revenue was S$1.63 billion, up 150.8 per cent from the restated turnover of $648.85 million a year ago, mainly on delivery of two jack-up rigs to Borr Drilling and the sale of the West Rigel semi-submersible rig.