Sembcorp Marine: HSBC reiterated its Buy rating with TP of $3.59, citing that order backlog concerns from its main customer, Sete Brasil, is likely to dissipate in the next few months.
Further, new orders are expected to bounce back to $3.3b from 2016 onwards, as demand for offshore drilling rig recovers from a rebound in oil prices, continued rig scrapping and cold stacking of older rigs, which will keep the fleet flat despite a spate of new deliveries.
Valuations have been hit by weak new orders and risks to Sete Brasil orders. Likewise, house believes a gradual increase in new orders flow, improvement in oil prices and resolution of Sete Brasil’s financing issue are likely to drive the stock price.
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