Sembcorp Marine

Sembcorp Marine: Reported excellent set of results, with 3Q Net-profit at $296m, +104%YoY and +68.1%QoQ, attributed to a one-off write back of $53m gained from a settlement with Soc Gen. Excluding write back, 3Q Net Profit amounted to $243m, +68%YoY and +38.0%QoQ, vs consensus estimates of $200m. Rev at $1.1b was however -27%YoY and +2%QoQ, attributed to lower progressive rev recognition from the rig building, ship conversion and offshore projects....

Stellar bottom line attributed to continued improving operational efficiency, with 3QCOGS, -40.4%YoY and 9m10 Gross Margins at 21.3% & Operating Margins at 18.1% vs FY09 of 17.2% and 15.1% respectively, while contributions from associates and JVs improved 91% QoQ, mainly due to higher contributions from Cosco Shipyard…

We note that result brings 9m10 Rev to $3.6b, -19%YoY, however gross profit at $761m, +39%YoY. With 9m10 EPS at 30c, grp look set to beat average FY10EPS estimates of 32.1c and FY09 of 33.8c. Annualizing EPS (excluding write-back) would see conglomerate trade at 36c, translating to FY10E P/E of 13.1x...

Balance sheet remains strong with a net cash of $2.5b ($1.20/share), with orderbook at $4.7b vs FY09 rev of $5.7b, underpinning earnings visibility till 1Q2013. Going forward, grp tips fundamentals driving O&G sector to remain intact with oil prices hitting 2 yrs high. Notes that while enquiries for new rigs have improved, competition is very keen. Remains buoyant on ship repair, as market outlook improve with the bigger docks well-booked into early next yr…

Deutsche, Daiwa, JP Morgan, BNP Paribas and Kim Eng maintain Buy Call with TP of $6.30, $5.75, $5.30, $5.58 and $5.40 respectively. Stock is expected to take out recent 52 week high of $4.79.