Hot stock: SembMarine shares rise despite Q4 profit tumble

Published Wed, Feb 20, 2019 · 05:10 AM

SHARES of Sembcorp Marine traded higher on Wednesday despite the offshore engineering group's Q4 profit sharp drop, as analysts and traders say the results beat their expectations. 

The stock was trading at S$1.67 as at 12.30pm, up 5.7 per cent or S$0.09. Some 23.3 million shares changed hands. 

Before market open on Wednesday, SembMarine announced that net profit for the fourth quarter fell 94.9 per cent to S$5.9 million from S$117.3 million a year ago on "continued low overall business volume", impairment of an asset and accelerated depreciation costs. The group also recorded full year net losses of S$74.1 million, reversing from a net profit of S$260.2 million the year before.

However, analysts from DBS and OCBC said the earnings were stronger than expected. 

OCBC's Low Pei Han said the full year net loss beat their forecast of a S$85.6 million net loss and the street's expectation of a S$97 million net loss, while SembMarine also saw fourth-quarter revenue edge up 0.2 per cent year-on-year to S$913.2 million. 

"It is encouraging to see the group swing into the black (in Q4) after being in the red in the previous quarters," she said.

Pending an analyst briefing, OCBC is maintaining their "hold" rating but put their fair value estimate of S$1.73 under review.

Traders agreed that SembMarine's results beat expectations. Marcus Toh, principal trading representative at PhillipCapital, said it was also expected that SembMarine would not announce dividends.

On the counter's trading volume on Wednesday, he said buy orders were mainly from institutions.

As for further catalysts to SembMarine's stock price, DBS analyst Yeo Kee Yan highlighted that oil prices have risen in the past three weeks, which should help stock price. 

CMC's Margaret Yang concurred that higher oil prices are lifting optimism on oil and gas related companies. She pointed out that aside from SembMarine, Sembcorp Industries and Keppel Corp were also trading up on Wednesday. 

Sembcorp Industries was 3.11 per cent or S$0.08 higher at S$2.65 at 12.30pm, while Keppel Corp was trading at S$6.26, up 2.29 per cent or S$0.14. 

OCBC's Ms Low said: "What would catalyse the stock price (of SembMarine) is still new order flow that is sustainable going forward."

PhillipCapital trader Robin Ho had a different take - another catalyst could be the "persistent talk over the years" of a merger with Keppel Corp, he said. 

"With orders at a trough and expectation of only a modest recovery, a merger with Keppel Corp could create a global giant that is more resilient and competitive," he concluded. 

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