Sembcorp Marine

Sembcorp Marine: Announced 2Q12 results which was below estimates, largely due to timing issues, not underperformance. Rev at $1.2b, +46% yoy and +29% qoq, while net profit at $142.8, -5% yoy and +26% qoq. Operating margin for 2Q12 was slightly higher on a qoq basis at 13.1% (12.8% in 1Q12). Excluding currency effects, operating margin for 2Q12 would have been 13.9%. Mgt expects margin to improve going into 2H12 and maintains guidance for 14-15% operating margins for FY12. The lower margin for 1H12 was due to early phases of project executions in which recognition was more conservative. Going into 2H12, margins could improve with more ship repair jobs, variation orders for projects near the tail-end and more aggressive recognition. New orders secured YTD amounted to $3.1b while net orderbook stood at $6.6b with deliveries up till 2Q15. Street believes that the anticipated US$4. ($5b) drillship orders from Sete Brasil should be awarded soon and SMM is in the final stages of ironing out the terms of the contract. Taking into account the Sete Brasil orders. Ratings as follow: Daiwa maintains Outperform but reduces TP to $5.58 from $5.85 Deutsche maintains Buy with $5.45 TP. DMG maintains Buy with $5.70 TP. Maybank KE maintains Buy with $6.20 TP. Nomura maintains Buy with $6.08 TP.