Singapore’s two shipyard groups are expected to report very different results for the financial year, according to analysts.
Keppel Corp, which is due to report later this week, will reveal a second half net profit of SGD 459m ($341m), according to CGS CIMB Research analyst Siew Khee Lim.
She said this would represent a 53% half-on-half increase compared to a year ago as the company benefits from divestment gains of SGD 396m
Lim also anticipates a stronger final dividend of between SGD 0.16 and SGD 0.18 thanks to SGD1.6bn in proceeds from asset recycling efforts.
“The next major milestone for Keppel Corp is the finalisation of the proposed merger with Sembcorp Marine which we believe may be concluded by the first half of 2022,” Lim said in a note to investors.
Adrian Loh, head of research at UOB Kay Hian, forecasts that Keppel Corp will report a full-year profit of SGD 628m, reversing a year-ago loss.
“With revenue for the first nine months of the year above that of pre-Covid-19 levels, we believe full-year results will be strong,” he said.
He also anticipates the potential for a higher-than-expected dividend payout with the payout in the first half of the year at SGD 0.12 significantly higher than the year-ago figure of just SGD 0.03.
Loh said he maintains his buy recommendation on Keppel Corp with a some-of-the-parts-based target price of SGD 6.74 per share. Keppel Corp’s shares currently trade at around SGD 5.40 each.
“Given the more bullish oil price environment, we believe that there is upside to our target price in the near to medium term,” he added.
In contrast, Loh expects Sembcorp Marine to report a loss of nearly SGD 1b despite an 11% increase in revenue. The company booked a first-half loss of SGD 650m.
“As a result, the market should not be surprised if the company issues a profit warning closer to the reporting date in late-February,” he said.
Despite this, Loh still views Sembcorp Marine as having a “good risk/reward profile” given his belief that the newbuilding order momentum has troughed and current strong oil prices are supportive of the offshore marine industry.
“In addition, Sembcorp Marine’s third-quarter 2021 business update showed that its repairs and upgrades segment had continued to win new projects while the global offshore renewables construction industry remains strong,” he said.
Loh said the company had also seen an improved financial position following its recent SGD 1.5bn capital raising which has lowered its gearing to 0.4x as at end of the third quarter.
“The fresh funds should allow Sembcorp Marine to execute and complete its projects as well as for working its capital needs for new orders and projects,” he said.
