Sembcorp Marine - CGS-CIMB Research 2022-11-15: Yard Capacity To Return To 70% In FY23

Sembcorp Marine - Yard Capacity To Return To 70% In FY23

  • Sembcorp Marine (SGX:S51) expects losses in 2H22F to be similar to 1H22’s ~S$143m due to higher-than-expected labour costs extending into 2H22F. See Sembcorp Marine's business update announcement dated 15 Nov 2022.
    • Sembcorp Marine had contracted higher-skilled (and therefore higher cost) labour from neighbouring countries to tide it over a labour crunch in mid-2021. Contracts for the temporary workers expired in Jun 22 but COVID-19 restrictions delayed their repatriation, which resulted in one-off costs (double-digit S$m) for Sembcorp Marine in 2H22F. Sembcorp Marine expects them to be repatriated by end-FY22F.
    • Sembcorp Marine delivered 9 out of 12 projects in 9M22, including the Petrobras P-71 FPSO and appears on track to delivery another 3 projects in 4Q22.
    • In 3Q22, Sembcorp Marine serviced a total of 60 vessels in 3Q22 (1H22: 96 vessels) but stated that improvement in ship repair and upgrades business was slower than its expectations due to more planning required for some of the vessels, including LNG carriers as well as residual effects of COVID-19 measures. However, management sees repair capacity to return to 2019 levels by 2023F. Sembcorp Marine expects newbuild yard capacity could return to 70% of 2019 level.
  • Sembcorp Marine has a year-to-date order book of S$7.11bn with S$6.71bn of new contracts (including S$0.42m in repairs and upgrade) in 3Q22. This includes the S$4.25bn P-82 for Petrobras which commences construction in FY23F (engineering, design and procurement phase has started). Together, Keppel Offshore & Marine (KOM) and Sembcorp Marine’s order book is at S$18.9bn. Completion of merger is still set between Dec 22 and Jan 23 as per Sembcorp Marine.
  • Reiterate ADD rating on Sembcorp Marine with target price of S$0.19 on 1.6x P/BV.
    • Our target price for Sembcorp Marine is based on the average trading band since the oil price crash in 2015. It also represents a 50% discount to the average of 2-4x P/BV in 2013-2016 during the peak cycle.
    • We reiterate ADD recommendation on improved earnings prospects for Sembcorp Marine in light of the upcoming acquisition of Keppel Offshore & Marine.

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @

LIM Siew Khee CGS-CIMB Research | Izabella TAN CGS-CIMB Research | 2022-11-15
SGX Stock Analyst Report ADD MAINTAIN ADD 0.190 SAME 0.190

Previous report by CGS-CIMB:
2022-10-28 Sembcorp Marine - Closer To Becoming The Largest Regional Yard

Check out the most recent target prices at Sembcorp Marine Target Prices. Listing of analyst research reports at Sembcorp Marine Analyst Report.

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Sembcorp Marine Share Price History,
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