Monday, November 26, 2012
Sembcorp Marine: Citi maintains Buy, TP 5.40 from 6.10, Strong Orderbook prospects, but shadowed by Margin Concerns. House lower earnings forecast to reflect lower revenue recognition and margin assumptions, but believe that street concerns over its prospects are overdone. SMM remains a viable play on the strength of the E&P cycle and its enlarged product mix has broadened its market opportunity. House cut 2012-13E EPS by ~4-11% (largely on lower margin projections) but raise 2014E by ~6% (higher repair contributions & drillship revenue recognition). With the stock trading below mid-cycle valuations, the recent weakness could be an enhanced buying opportunity.