Broker's take: UBS upgrades SembMarine to 'buy'; target price at S$3.06

UBS Investment Research on Tuesday upgraded its rating on oil-and-gas firm Sembcorp Marine to a "buy" rating, and lifted its target price to S$3.06 from S$1.85 previously.

The bank said that SembMarine is expected to see a revival of new orders to S$4 billion in 2018, ending a two-year slump.

"A break of dawn," said UBS in its brokerage report.

"We view SembMarine's new Singapore yard as a game changer. The larger physical scale and higher level of automation allows it to chase jobs above US$1 billion, larger than the contracts it typically pursued in the past."

It also pointed out that the order momentum is picking up, while the recent deals to sell nine jack-ups for US$1.3 billion and a semisub for US$500 million improves SembMarine's balance sheet significantly. Net gearing is expected to fall to less than 30 per cent by the end of 2018.

"We expect incoming orders to be on milestone payment terms, easing the burden on working capital," UBS said.

Shares of SembMarine continue their climb on Tuesday, rising to S$2.59, up 20 Singapore cents or 8.4 per cent. It was among the most actively traded stock, with nearly 21 million shares changing hands as at 1.38pm.