SEMBCORP MARINE | BUY
RESEARCH, APRIL 28
TARGET PRICE: S$2.01
April 28 close: S$1.63
In Q1 2017, Sembcorp Marine had new orders of S$75 million. New order enquiries for non-drilling solutions have increased over the past two months.
SembMarine has made progress in the development of its near-shore gas infrastructure solutions using its Gravifloat technologies.
With better visibility of new order flow relating to Gravifloat, we raise our valuation from 1.4x to 1.6x FY17F book (still lower than the -1 standard deviation of 1.95x since 2003), and our fair value estimate rises from S$1.76 to S$2.01.
SEMBCORP MARINE | HOLD
RHB, APRIL 28
TARGET PRICE: S$1.65
April 28 close: S$1.63
Sembcorp Marine booked a S$47 million gain on disposal, arising from its 30 per cent divestment in Cosco Shipyard Group. Stripping the gain on disposal, SembMarine registered a core loss of S$12 million.
We understand that the loss is due to a specific floater project that incurred additional cost, and we expect settlement for the project to happen in Q2 2017.
We expect the core loss to be reversed in the coming quarters as the floater issue is rectified.
Our higher TP of S$1.65 is now based on 1.3x P/BV (from 15x FY17F P/E previously), on par with SembMarine's average P/BV before the crude oil price rally in the early 2010s.
DUTY FREE INTERNATIONAL
CIMB, APRIL 27
TARGET PRICE: S$0.57
April 28 close: S$0.42
The unexpected implementation of 6 per cent goods & services tax (GST) at border outlets and duty free zones effective from Jan 1, 2017, could affect perfume & cosmetics more.
We see little risk of the GST squeezing gross margins, as Duty Free International Limited is likely to pass that on to consumers, while a more efficient supply chain could actually lift margins.
We lower our FY18-19F revenue growth assumptions to account for soft consumer sentiment at the Malaysian-Thai border and possibly weaker P&C sales due to the additional GST. We also raise our forecast for FY18 gross margin, and factor in an enlarged share base from the 34.2 million new placement. With that, our FY18-19 EPS estimates fall 5-9 per cent.
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