SMM

SMM: ($4.09) 4Q13 results beat, but street has reservations on outlook Sembcorp Marine posted strong 4Q13 results which beat street expectations. Revenue soared 23% y/y to $1.69b, and net profit climbed 9% to $182.4m, boosted by four projects achieving initial recognition milestone and a lower than expected tax rate. For the full year, net profit rose 3% to $555.7m, on the back of a 25% jump in revenue to $5.53b, as the group delivered a total of eight jack ups last year. Driven by the $4.2b in contract orders secured in 2013, SMM’s net orderbook now stands at $12.3b, with deliveries stretching into 2019. Management proposed a final dividend of 6¢ and special dividend of 2¢, bringing full year payout to 13¢ (unchanged from FY12). The group sees demand remaining strong for its big docks, including its new 73.3ha Sembmarine Integrated Yard@ Tuas Phase 1 facility that commenced operations in Aug last year. Construction of SMM’s Brazil yard continues to progress well and is on track to commence operations in 2H14. Still, some market watchers note potential execution risks for SMM as the group ramps up activity at its new yards, and scales the learning curve for its new drillship orders. Any slip-ups may potentially impact margins. Meanwhile, observers flag declining dayrates in the deepwater market and intense competition from the Chinese yards in the shallow water market, that could result in slower rig orders materializing in 2014. SMM trades at 15.4x core P/E, 3.1x P/B. Latest broker ratings: Deutsche maintains Sell with TP $3.65 CLSA maintains Underperform with TP $4.55 Credit Suisse maintains Neutral with TP $4.00 Daiwa keeps at Outperform, lowers TP to $4.70 (from $5.10) Maybank-KE reiterates Buy, trims TP to $5.04