Sembcorp Marine

Sembcorp Marine | HOLD

Aug 20 close: S$1.66

Target price: S$1.74

OCBC Investment Research, Aug 20

After appreciating close to 50 per cent to its peak of S$2.81 in early February, the share price of Sembcorp Marine (SembMarine) has dropped by about 40 per cent to the current price of S$1.67.

Currently, the stock is trading at about 1.45 times forward price-to-book ratio, compared to its trough of 0.9 in early 2016, and its peak of 3.2 times in Q4 2013 over the past five years.

Though new contracts secured in the first half of the year totalled S$730 million, we keep our new order target of S$3 billion for this year and next unchanged for now, given the lumpiness and significant size of potential new orders.

Despite the low forecasted return on equity for now, we believe that SembMarine's established track record in the offshore marine space, innovative technology, and its new mega yard put it in good stead to secure a wider range of work than before.

Investors have to take a longer term view of the stock, while staying vigilant of any news from the Brazil front.

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