UOB Kay Hian (UOBKH) research team views mainboard-listed $SEMBCORP MARINE LTD(S51.SI)$ as a "turnaround story" with its recent large order win, indicating possible positives when it comes to new order wins, especially when it comes to the renewables sector.
The research team continues to project a slight loss for Sembmarine in 2022, versus Bloomberg consensus estimates, which are projecting much larger losses. That being said, some of these loss forecasts have been scaled back the past 2 months, UOBKH noted.
"Should the company win more orders, the earnings turnaround story for 2023 could become more compelling over the next 6 months," UOBKH added.
It believes that much of Sembmarine's corporate-level risk has dissipated due to the completion of the group's S$1.5 billion rights issue. Temasek's mandatory general offer of S$0.08 per share had also lapsed in November 2021.
UOBKH attributed the rally in share price to the impending disclosure of the Sembmarine and Keppel Offshore & Marine's (Keppel O&M) merger terms; as well as new order wins for oil and gas production assets and renewable industry assets.
The research team holds the view that a merger between Sembmarine and Keppel O&M would create a more competitive and larger-scale offshore construction company that could be "on the cusp of a turnaround in profitability".
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