Hot stock: Sembmarine rises 4.3% after bagging 6 billion euros in contracts

SHARES of Sembcorp Marine (Sembmarine) rose as much as 4.3 per cent to hit a high of S$0.12 on Friday (Mar 31). This came after a day after the company announced that its consortium had secured contracts worth six billion euros (S$8.67 billion) for offshore renewables projects.

Sembmarine was the day’s top-traded stock by volume, with 784.8 million shares changing hands. Its share price eased slightly at the market close to S$0.119, up 3.5 per cent or S$0.004. No married deals were recorded, as indicated by ShareInvestor data.

As announced on Thursday, Sembmarine had secured three contracts to supply high-voltage, direct-current electrical transmission systems for three mega offshore wind-farm projects for Dutch transmission system operator TenneT.

The contracts were awarded jointly to Sembmarine and its consortium partner GE Renewable Energy’s Grid Solutions.

Work is slated to commence from the third quarter of 2024 at Sembmarine’s yards in Singapore and Batam, Indonesia.

Analysts were largely positive on the news. CGS-CIMB analysts Lim Siew Khee and Izabella Tan raised their target price on the marine and offshore engineering group to S$0.19 from S$0.12, while reiterating an “add” call.

They said the new target price is based on a 1.5 times price-to-book ratio for calendar year 2023, and further lifted their expectations of the group’s earnings per share by 10 per cent in FY2025.

CGS-CIMB estimated the company’s current order book to stand at S$23.1 billion, close to the peak combined order book of Keppel Offshore & Marine and Sembmarine from 2012 to 2014.

“With this win, we raise our annual order win expectations to S$7 billion for FY2023, and S$4 billion each for FY2024 and FY2025, from the previous S$3 billion per annum,” said the analysts.

“The award sets a new benchmark for the group as one of the biggest projects won in terms of capacity.”

DBS has a target price of S$0.14 on the counter, with a “buy” recommendation.

Its analysts expect more project wins from TenneT, given the company’s plans to install 40 GW of offshore wind energy in the German and Dutch North Seas, to enable Europe to be the world’s first climate-neutral continent by 2050. 

TenneT’s three mega offshore wind-farm projects have a combined capacity of 6 GW.