New orders for rigs, offshore renewable installations as well as repairs and upgrades for cruise ships and other commercial vessels could act as a catalyst for Sembcorp Marine’s share price, according to a local analyst.
“While the recent order win worth SGD200m ($144m) from the Brazilian Navy was largely expected, this nevertheless underscores the company’s continuing positive momentum and we expect more conventional and renewables orders in the near to medium term,” said UOB Kay Hian analyst Adrian Loh.
Loh said the Brazilian order was likely to push Singapore-listed Sembcorp Marine’s current order backlog to close to SGD2bn in value.
As of the end of the first quarter of 2022, Sembcorp Marine had a net orderbook of SGD1.75b consisting of SGD1.51b of projects under execution and SGD240m of ongoing repairs and upgrades projects.
During the first quarter, Sembcorp Marine disclosed that it had won various repairs and upgrade contracts, including three vessels for the US Navy as well as nine containerships from Maersk.
“The offshore construction cycle for both conventional oil and gas and renewables has room for growth in the next few years, especially given the lack of spending by the global oil and gas industry, thus constraining energy supply,” said Loh.
Research company Rystad Energy recently forecast that installations and investments in the global offshore wind industry are set to surge this decade as nations seek to transition to cleaner sources of energy, with total capital expenditure projected to more than double to $102bn by 2030.
In addition, Loh said the war in Ukraine appears to have led to a “re-focus by majors such as BP, Eni, Shell, ExxonMobil and Equinor towards further investment in offshore Africa”.
Loh said bullish expectations driven by elevated crude oil prices above $100 have also resulted in oil majors looking to increase production.
“This translates to higher capex [capital expenditure] towards reactivating offshore production platforms and further raised industry utilisation for offshore supply vessels (OSV),” he said.
Looking ahead, Loh said the upcoming merger with Keppel Offshore Marine (KOM), if successful, will create a pure-play company with the depth and breadth of engineering and operational capabilities that can compete on a greater scale.
“In addition, the merged company should have much stronger financials and human resources to undertake the necessary research and development to compete effectively on the global stage,” he said.
