Sembcorp Marine Buy

Transcription

Sembcorp Marine Buy
Company Update, 3 November 2014
Sembcorp Marine (SMM SP)
Buy (Maintained)
Energy & Petrochemicals - Oil & Gas Services
Market Cap: USD5,891m
Target Price:
Price:
SGD4.50
SGD3.62
Macro
Risks
High-Spec Shallow-Water Rigs Still In Demand
Growth
Value
Sembcorp Marine (SMM SP)
Relative to Straits Times Index (RHS)
100
4.20
95
4.00
90
3.80
85
3.60
80
3.40
16
14
12
10
8
6
4
2
75
May-14
Jan-14
0
0
.2
0
0
Sembcorp Marine (SembMarine) secured a contract worth USD240m to .
0
build a Pacific Class 400 jack-up rig for Bank of Tokyo-Mitsubishi UFJ, 0
with Japan Drilling Co (JDC) as the lessor and operator of the asset. Its 0
YTD order wins are SGD4.2bn, on track to meet our target of SGD4.5bn.
Valuations of 11-13x FY14-16F P/E on trough earnings appear attractive.
Maintain BUY with SGD4.50TP based on SOP (a 24.3% upside).


Sep-14
4.40
Jul-14
105
Mar-14
4.60
Nov-13
Vol m
Price Close

Source: Bloomberg
Avg Turnover (SGD/USD)
13.0m/10.3m
Cons. Upside (%)
33.7
Upside (%)
24.3
52-wk Price low/high (SGD)
3.58 - 4.50
Free float (%)
39
Share outstanding (m)
2,089
Shareholders (%)
Sembcorp Industries
60.6
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
(18.7)
(3.2)
(12.6)
(11.1)
(20.8)
Relative
(20.8)
(1.9)
(9.0)
(10.2)
(20.9)

Good order momentum. SembMarine secured a USD240m contract to
build a Pacific Class 400 (PC400) jack-up rig, provisionally named
Hakuryu 14, for BOT Lease Co., Ltd. (BOTL), a leasing company of
Bank of Tokyo-Mitsubishi UFJ (8306 JP, NR). The rig is scheduled for
delivery by Oct 2016 and will be leased and operated by JDC (1606 JP,
NR).
High-specification jack-up rigs still in demand. Since the launch of
the PC400 in 2010, 18 units have been ordered with nine units delivered
and operating in various countries. This contract marks the second
PC400 jack-up rig that SembMarine is building for BOTL. The first unit,
Hakuryu 12, is nearing completion, with delivery scheduled in Jan 2015.
These rigs are capable of operating in 400 feet of water and drilling highpressure, high-temperature wells to depths of 35,000 feet and come with
accommodations for 150 persons.
Stronger contract wins YTD vs Keppel. SembMarine’s YTD order wins
stand at SGD4.2bn, well on track to meet our SGD4.5bn target. We note
that it has actually outpaced key rival Keppel (KEP SP, BUY, TP:
SGD12.60), who has SGD4.0bn of order wins so far, whereas its share
price has underperformed Keppel’s on a relative basis.
Time for (re-)entry. SembMarine has fallen 21% in the last 12 months
due to potential delays over the delivery of its drillship to Brazil and
recently on oil prices. Its shares are now trading at 6-8x EV/EBITDA and
11-13x P/E for FY14-16F, on what are basically trough earnings.
Forecast dividend yields are now topping 4%. We believe most of the
fears have been priced in and current valuations present an attractive
entry point. Our SOP-valuation pegs shipyard earnings at a mid-cycle
16x for a SGD4.50TP, implying a 24.3% upside.
Forecasts and Valuations
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
4,430
5,526
6,148
6,801
6,766
Reported net profit (SGDm)
538
556
574
631
671
Recurring net profit (SGDm)
541
553
574
631
671
(28.3)
2.3
3.7
9.9
6.4
Recurring EPS (SGD)
0.26
0.27
0.27
0.30
0.32
Total turnover (SGDm)
Recurring net profit growth (%)
Shariah compliant


2

.
1
0
.
2




DPS (SGD)
0.13
0.13
0.14
0.15
0.16
Lee Yue Jer, CFA +65 6232 3898
Recurring P/E (x)
14.0
13.7
13.2
12.0
11.3
yuejer.lee@sg.oskgroup.com
P/B (x)
3.10
2.82
2.54
2.29
2.07
P/CF (x)
36.2
8.1
17.0
9.0
9.1
3.6
3.6
3.9
4.1
4.4
7.48
7.14
7.65
6.74
6.00
22.2
21.7
20.3
20.1
19.3
Dividend Yield (%)
EV/EBITDA (x)
Return on average equity (%)
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
net cash net cash net cash net cash net cash
(6.4)
(5.1)
0.9
Source: Company data, OSK-DMG
See important disclosures at the end of this report
Powered by EFA
TM
Platform
1
Sembcorp Marine
(SMM SP)
3 November 2014
Financial Exhibits
Profit & Loss (SGDm)
Dec-12
Dec-13
Dec-14F
Dec-15F
Total turnover
4,430
5,526
6,148
6,801
6,766
Cost of sales
(3,736)
(4,818)
(5,365)
(5,927)
(5,846)
Gross profit
Gen & admin expenses
Other operating costs
Dec-16F
695
708
784
874
920
(149)
(148)
(165)
(183)
(182)
9
85
55
55
55
Operating profit
554
644
674
746
793
Operating EBITDA
648
745
787
906
959
Depreciation of fixed assets
(94)
(101)
(113)
(160)
(166)
Operating EBIT
554
644
674
746
793
Net income from investments
56
16
20
20
20
Interest income
25
10
14
8
10
Interest expense
(3)
(8)
(11)
(10)
Exceptional income - net
(2)
3
-
-
(9)
-
Pre-tax profit
630
665
696
765
813
Taxation
(62)
(77)
(104)
(115)
(122)
Minority interests
(29)
(33)
(17)
(19)
(20)
Profit after tax & minorities
538
556
574
631
671
Reported net profit
538
556
574
631
671
Recurring net profit
541
553
574
631
671
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
554
644
674
746
793
94
101
113
160
166
(424)
369
(241)
48
50
(123)
Source: Company data, OSK-DMG
Cash flow (SGDm)
Operating profit
Depreciation & amortisation
Change in working capital
Other operating cash flow
Operating cash flow
(0)
-
(3)
-
275
991
546
955
956
Interest received
25
11
14
8
10
Interest paid
(2)
(11)
(11)
(10)
1
1
-
-
Dividends received
(9)
-
Tax paid
(90)
(54)
(104)
(115)
(122)
Cash flow from operations
208
938
444
838
834
(517)
(815)
(750)
(500)
(60)
(12)
(2)
-
-
-
1
18
-
-
-
Capex
Other new investments
Other investing cash flow
Cash flow from investing activities
(528)
(799)
(750)
(500)
(60)
Dividends paid
(522)
(272)
(272)
(313)
(313)
Proceeds from issue of shares
Increase in debt
Other financing cash flow
Cash flow from financing activities
Cash at beginning of period
Total cash generated
Forex effects
Implied cash at end of period
2
1
-
300
438
-
(12)
(32)
(232)
135
1,990
1,409
(551)
275
(30)
11
1,409
1,695
(272)
1,695
(578)
1,117
(200)
(513)
1,117
(175)
942
(199)
(512)
942
262
1,204
Source: Company data, OSK-DMG
See important disclosures at the end of this report
2
Sembcorp Marine
(SMM SP)
3 November 2014
Financial Exhibits
Balance Sheet (SGDm)
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
Total cash and equivalents
1,409
1,695
1,117
942
1,204
Inventories
1,731
2,084
2,106
2,329
2,317
Accounts receivable
468
442
640
708
704
Other current assets
32
0
-
-
-
3,641
4,221
3,863
3,979
4,226
Total current assets
Total investments
633
597
617
637
657
1,476
2,394
3,031
3,371
3,265
Intangible assets
34
30
30
30
30
Total other assets
2
7
7
7
7
Total non-current assets
2,146
3,029
3,686
4,045
3,960
Total assets
5,786
7,250
7,548
8,025
8,185
33
166
166
166
166
1,687
1,781
2,190
2,422
2,410
Tangible fixed assets
Short-term debt
Accounts payable
Other current liabilities
998
1,583
1,153
1,260
1,255
2,718
3,530
3,509
3,849
3,831
Total long-term debt
300
600
600
400
201
Other liabilities
221
310
310
310
310
Total non-current liabilities
521
910
910
710
511
3,239
4,441
4,419
4,559
4,342
Total current liabilities
Total liabilities
Share capital
480
484
484
484
484
Retained earnings reserve
1,958
2,193
2,495
2,812
3,170
Shareholders' equity
2,439
2,677
2,979
3,297
3,654
109
132
150
169
189
-
-
-
-
Minority interests
Other equity
0
Total equity
2,547
2,810
3,129
3,466
3,844
Total liabilities & equity
5,786
7,250
7,548
8,025
8,185
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
11.9
24.7
11.3
10.6
(0.5)
Operating profit growth (%)
(24.8)
16.2
4.5
10.8
6.2
Net profit growth (%)
(28.4)
3.2
3.3
9.9
6.4
EPS growth (%)
(28.6)
3.1
3.2
9.9
6.4
0.8
9.8
11.2
10.7
10.8
Operating margin (%)
12.5
11.7
11.0
11.0
11.7
Net profit margin (%)
12.2
10.1
9.3
9.3
9.9
Return on average assets (%)
9.9
8.5
7.8
8.1
8.3
Return on average equity (%)
22.2
21.7
20.3
20.1
19.3
Source: Company data, OSK-DMG
Key Ratios (SGD)
Revenue growth (%)
Bv per share growth (%)
Net debt to equity (%)
(42.2)
(33.1)
(11.2)
(10.8)
(21.8)
DPS
0.13
0.13
0.14
0.15
0.16
Recurrent cash flow per share
0.10
0.45
0.21
0.40
0.40
Source: Company data, OSK-DMG
See important disclosures at the end of this report
3
Sembcorp Marine
(SMM SP)
3 November 2014
SWOT Analysis
 One of the world’s top offshore rig builders with its
own proprietary designs
 Competition
from overseas
yards in China
and South
Korea in terms
of price and
financing could
eat into its
market share
 Its new yard in Tuas is one of the most modern
shipyard facilities in the world
 Well-positioned
to benefit from
strong demand
for offshore
products by
Petrobras in
Brazil
 More stringent
regulations from
the International
Maritime
Organisation
(IMO) may
create new
business
opportunities
 Tightening foreign labour supply in Singapore
 Its core offshore products are in direct competition
with Chinese and Korean yards
P/E (x) vs EPS growth
P/BV (x) vs ROAE
16
15%
4
35%
14
9%
3
30%
12
3%
3
25%
10
-4%
2
20%
8
-10%
6
-16%
2
15%
1
10%
0%
P/E (x) (lhs)
EPS growth (rhs)
Source: Company data, OSK-DMG
Jan-13
P/B (x) (lhs)
Jan-16
0
Jan-15
-35%
Jan-14
0
Jan-12
5%
Jan-16
1
Jan-15
-29%
Jan-14
2
Jan-13
-23%
Jan-12
4
Return on average equity (rhs)
Source: Company data, OSK-DMG
Company Profile
Sembcorp Marine is a leading marine and offshore engineering group and is renowned for its rig building and offshore conversion.
See important disclosures at the end of this report
4
Sembcorp Marine
(SMM SP)
3 November 2014
Recommendation Chart
Price Close
4.90
4.50
5.00
5.40
5.60
4.65
4.61
4.76
5.70
5.80
6.14
6.00
5.16
5.25
6.25
5.46
5.95
6.40
6.30
5.30
3.73
4.70
3.70
4.42
3.67
3.51
5.40
3.51
5.90
3.31
Recommendations & Target Price
na
6.40
4.40
3.90
3.40
Buy
2.90
Nov-09
Neutral
Feb-11
Sell
Trading Buy
May-12
Take Prof it
Not Rated
Aug-13
Source: OSK-DMG, Bloomberg
Date
Recommendation
2014-10-09
Buy
Target Price Price
4.50
3.68
2014-05-04
Buy
5.00
4.06
2014-02-28
Buy
5.40
4.11
2014-02-25
Buy
5.40
4.04
2013-11-06
Buy
5.40
4.37
2013-09-12
Buy
5.60
4.41
2013-08-02
Neutral
4.65
4.43
2013-05-06
Neutral
4.65
4.25
2013-02-22
Neutral
4.76
4.51
2012-12-07
Neutral
4.76
4.51
Source : OSK-DMG, Bloomberg
See important disclosures at the end of this report
5
RHB Guide to Investment Ratings
DMG & Partners Research Guide to Investment Ratings
Buy: Share price may exceed 10% over the next 12 months
Trading
Buy:
Share
may10%
exceed
over 12
themonths
next 3 months, however longer-term outlook remains uncertain
Buy:
Share
price
mayprice
exceed
over15%
the next
Neutral: Buy:
ShareShare
price price
may fall
within
the 15%
rangeover
of +/the next
12 months
Trading
may
exceed
the10%
nextover
3 months,
however
longer-term outlook remains uncertain
Take Profit:
Target
been attained.
accumulate
lower
Neutral:
Share
priceprice
may has
fall within
the rangeLook
of +/-to10%
over theatnext
12 levels
months
Sell: Share
may
fall has
by more
10% over
next 12 months
Take
Profit:price
Target
price
beenthan
attained.
Look the
to accumulate
at lower levels
Not Rated:
Stockmay
is not
regular
coverage
Sell:
Share price
fallwithin
by more
thanresearch
10% over
the next 12 months
Not Rated: Stock is not within regular research coverage
Disclosure & Disclaimer
DISCLAIMERS
All research is based on material compiled from data considered to be reliable at the time of writing, but RHB does not make any representation or
warranty,
express
or implied,
as &
to Partners
its accuracy,
completeness
or correctness.
No distribution
part of this only.
reportIt is
to be
an offer
or solicitation
of an offer
This
research
is issued
by DMG
Research
Pte Ltd and
it is for general
does
notconstrued
have anyas
regard
to the
specific investment
to transact financial
any securities
or and
financial
instruments
referred
to herein
otherwise.
ThisYou
report
is general
in nature
and has
been prepared for
objectives,
situation
particular
needs ofwhether
any specific
recipient
of thisorresearch
report.
should
independen
tly evaluate
particular
information purposes
only.
is intended for
circulation
to the
clients
of RHB
its relatedorcompanies.
Any
contained
in securities
this reportor
does
investments
and consult
anItindependent
financial
adviser
before
making
any and
investments
entering into
anyrecommendation
transaction in relation
to any
not have regard
to thementioned
specific investment
objectives, financial situation and the particular needs of any specific addressee. This report is for the
investment
instruments
in this report.
information of addressees only and is not to be taken in substitution for the exercise of judgment by addressees, who should obtain separate legal or
financial
advice to
independently
particular
investments
strategies.
The
information
contained
herein evaluate
has beenthe
obtained
from
sources weand
believed
to be reliable but we do not make any representation or warranty nor
accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions and views expressed in this report are subject to change
This report
may further consist of, whether in whole or in part, summaries, research, compilations, extracts or analysis that has been prepared by RHB’s
without
notice.
strategic, joint venture and/or business partners. No representation or warranty (express or implied) is given as to the accuracy or completeness of such
information
and accordingly
investors
theirorown
informedofdecisions
on the
same.
This report does
not constitute
or formshould
part of make
any offer
solicitation
any offer before
to buy relying
or sell any
securities.
RHB, &itsPartners
affiliatesResearch
and related
companies,
their respective
directors,
connectedPte
parties
employees
mayOSK
ownInvestment
or have positions
DMG
Pte Ltd
is a wholly-owned
subsidiary
of DMGassociates,
& Partners Securities
Ltd, aand/or
joint venture
between
Bank in
securitiesMalaysia
of the company(ies)
covered
in this
research
report or any
securities
thereto,
andismay
fromto
time
to time add
to, or
or may be
Berhad,
which have since
merged
into
RHB Investment
Bank
Berhad related
(the merged
entity
referred
as “RHBIB”
which
i n dispose
turn is a off,
whollymaterially
interested
in any
such securities.
Further,
RHB,
its Pacific
affiliates
and related
companies
do and
seek to doBank
business
withDMG
the company(
covered
owned
subsidiary
of RHB
Capital
Berhad) and
Deutsche
Asia
Holdings
Pte Ltd
(a subsidiary
of Deutsche
Group).
& Partnersies)
Securities
in this
report
may from time
to timeSecurities
act as market
maker
or have assumed an underwriting commitment in securities of such company(ies),
Pte
Ltdresearch
is a Member
of and
the Singapore
Exchange
Trading
Limited.
may sell them or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or
underwriting
services
for or Pte
relating
to such
as well and/or
as solicit
such investment,
from
any entity in
mentioned
in this
DMG & Partners
Securities
Ltd and
their company(ies),
associates, directors,
employees
may haveadvisory
positionsorin,other
and services
may effect
transactions
the securities
researchinreport.
covered
the report, and may also perform or seek to perform broking and other corporate finance related services for the c orporations whose securities
are covered in the report. This report is therefore classified as a non-independent report.
RHB and its employees and/or agents do not accept any liability, be it directly, indirectly or consequential losses, loss of profits or damages that may arise
from
reliance based
this&report
or further
communication
in relation to
this report,
where
such losses,
loss
profits
damages are
As
ofany
2 November
2014, on
DMG
Partners
Securities
Pte Ltd andgiven
its subsidiaries,
including
DMGincluding
& Partners
Research
Pte Ltd,
doofnot
haveorproprietary
alleged toinhave
arisen due
to the contents
such report or communication being perceived as defamatory in nature.
positions
the subject
companies,
except of
for:
a)
The term “RHB” shall denote where applicable, the relevant entity distributing the report in the particular jurisdiction mentioned specifically herein below
andofshall
refer to RHB
Research
Sdn who
Bhd,covered
its holding
affiliates,
subsidiaries
and
companies.
As
2 November
2014,
none of Institute
the analysts
thecompany,
stock in this
report has
an interest
in related
the subject
companies covered in this report, except
for:
a)
All Rights Reserved. This report is for the use of intended recipients only and may not be reproduced, distributed or publish ed for any purpose without prior
consent
of RHB and
RHB accepts
no liability
whatsoever
for the actions of third parties in this respect.
DMG
& Partners
Research
Pte. Ltd.
(Reg. No.
200808705N)
Malaysia
Kuala Lumpur
Hong Kong
Singapore
This report is published and distributed in Malaysia by RHB Research Institute Sdn Bhd (233327-M), Level 11, Tower One, RHB Centre, Jalan Tun Razak,
50400 Kuala Lumpur,
a wholly-owned
RHB
Investment
(RHBIB),
Malaysia Research
Office subsidiary ofRHB
OSK
SecuritiesBank
Hong Berhad
Kong Ltd.
(formerlywhich
knownin turn is a wholly-owned
DMG & subsidiary
Partners of RHB Capital
Berhad.
as OSK Securities
Securities Pte. Ltd.
RHB Research Institute Sdn Bhd
Hong Kong Ltd.)
Level 11, Tower One, RHB Centre
10 Collyer Quay
th
Jalan Tun Razak
12 Floor
#09-08 Ocean Financial Centre
Kuala Lumpur
World-Wide House
Singapore 049315
Malaysia
19 Des
Voeux Road
: +(65) 6533subsidiary
1818
This report is published
and distributed in Singapore by DMG & Partners
Research
Pte Ltd (Reg. No. 200808705N), a Tel
wholly-owned
of DMG &
Tel : Pte
+(60)Ltd,
3 9280
2185venture between Deutsche Asia Pacific
Central, Holdings
Hong KongPte Ltd (a subsidiary of Deutsche Fax
: +(65)
6532and
6211OSK Investment
Partners Securities
a joint
Bank
Gr oup)
Fax : +(60) 3 9284 8693
Tel : +(852) 2525 1118
Bank Berhad, Malaysia which have since merged into RHB Investment
Bank Berhad (the merged entity is referred to as “RHBIB”, which in turn is a whollyFax : +(852) 2810 0908
Singapore
owned subsidiary of RHB Capital Berhad). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited. DMG &
Shanghaicovered in this report for its corporate finance
Phnom
Penh
Partners Securities PteJakarta
Ltd may have received compensation from the company
or its
dealing activities; this
report is therefore classified as a non-independent report.
PT RHB OSK Securities Indonesia (formerly known as
RHB OSK (China) Investment Advisory Co. Ltd.
RHB OSK Indochina Securities Limited (formerly
OSK Nusadana
known
as OSK (China)
Investment
known as OSK
Indochina
Limited)
As of 2 NovemberPT2014,
DMG & Partners Securities Pte (formerly
Ltd and its
subsidiaries,
including
DMG & Partners Research
Pte Ltd
do notSecurities
have proprietary
Securities Indonesia)
Advisory Co. Ltd.)
No. 1-3, Street 271
positions in the securities
covered in this report, except for:
Plaza CIMB Niaga
Suite 4005, CITIC Square
Sangkat Toeuk Thla, Khan Sen Sok
a)
14th Floor
1168 Nanjing West Road
Phnom Penh
Jl. Jend. Sudirman Kav.25
Shanghai 20041
Fax : +(6221) 2598 6777
Fax : +(8621) 6288 9633
Cambodia
As of 2 November
2014, none
the analysts who covered the securities inChina
this report has an interest in such securities,Tel:
except
for:
Jakarta Selatan
12920,ofIndonesia
+(855)
23 969 161
a)
Tel : +(6221) 2598 6888
Tel : +(8621) 6288 9611
Fax: +(855) 23 969 171
Special Distribution by RHB
Bangkok
Where the research report is produced by an RHB entity
(excluding
DMG
& Partners
Pte Ltd) and distributed in Singapore, it is only distributed
RHB OSK
Securities
(Thailand)
PCLResearch
(formerly known
to "Institutional Investors", "Expert Investors" or "Accredited Investors"
as defined
in the Securities
and Futures Act, CAP. 289 of Singapore. If you are not
as OSK Securities
(Thailand)
PCL)
an "Institutional Investor", "Expert Investor" or "Accredited 10th
Investor",
this research
is not intended for you and you should disregard this research
Floor, Sathorn
Square report
Office Tower
report in its entirety. In respect of any matters arising from, or 98,
in connection
with
this research report, you are to contact our Singapore Office, DMG &
North Sathorn
Road,Silom
Bangrak, Bangkok 10500
Partners Securities Pte Ltd
Hong Kong
Thailand
Tel: +(66) 2 862 9999
Fax : +(66) 2 108 0999
This report is published and distributed in Hong Kong by RHB OSK Securities Hong Kong Limited (“RHBSHK”) (formerly known as OSK Securities Hong
Kong Limited), a subsidiary of OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is
referred to as “RHBIB”), which in turn is a wholly-owned subsidiary of RHB Capital Berhad.
RHBSHK, RHBIB and/or other affiliates may beneficially own a total of 1% or more of any class of common equity securities of the subject co mpany.
6
RHBSHK, RHBIB and/or other affiliates may, within the past 12 months, have received compensation and/or within the next 3 months seek to obtain
compensation for investment banking services from the subject company.
Risk Disclosure Statements