Brokers' take

Sembcorp Marine | Buy May 3 close: S$1.67 Fair value: S$2.10 Citi Research, May 3

Sembcorp Marine (SMM) continues to turn the corner, reporting back-to-back quarters of black ink. We see an improving outlook in the offshore production space driving new orders, while yard activity is expected to be ramped up on larger orders secured over the last year or so. While eyes will inevitably be on SMM's gearing levels, the successful monetisation of its rig inventory should ease pressure going forward.

Q1 FY19 profit after tax and minority interests (Patmi) was S$2 million (Q1 FY18: S$5 million), which would have been higher at S$12 million excluding the impact of S$10 million accelerated depreciation from the early move out of Tanjong Kling. Revenue was +27 per cent year on year (y-o-y) (adjusting for the effects of jack-up deliveries to Borr Drilling and BOTL) on topline growth for Ship Repair (+30 per cent y-o-y; improved vessel mix) and Floaters (+35 per cent y-o-y; ramp-up of Johan Castberg, Vito and Karish).