Sembcorp Marine’s First Quarter Results: Full Steam Ahead!

Ser Jing - Sembcorp Marine First Quarter Result, Full Steam Ahead (pic)Sembcorp Marine (SGX: S51) released its first quarter results on Friday evening and posted a 5% increase in quarterly net income from S$113m last year to S$119m. The company’s top-line for the quarter also grew, standing at S$1.05b. That’s 11% higher than last year’s S$943m. Higher revenue recognition from rig-building helped the company push its top-line growth forward.

The company has three main sectors; Ship Repair; Rig Building; and Ship conversion & offshore. Together, they accounted for 99.5% of the company’s first quarter revenue.

Rig Building saw the greatest growth as revenues increased by 52% from $393m a year ago to S$598m. Ship Repair’s quarterly sales saw a 9% year-on-year growth from S$143m to S$156m. The last sector, Ship conversion & offshore was the most disappointing as its revenue slipped by 27% from S$401m last year to S$291m.

Sembcorp Marine’s net order book has now hit a new record of $13.6b (a 7% increase from last year’s $12.7b) with orders stretching till 2019. The net order book grew on the back of contracts worth a total of $1.7b that were secured since the start of the year. The order book’s important for SembCorp’s investors because it represents a portion of future revenue and investors will be happy to know that the company “expects to grow its order book” for the rest of the year.

Shareholders of Sembcorp Industries (SGX: U96) should also be looking closely at Sembcorp Marine’s results and be pleased at a general uptick in its business activities, given that the former owns 60% of the latter. Sembcorp Industries will be releasing its first quarter results on next Wednesday, 8 May 2013.

Regarding the outlook for the rest of the year, Sembcorp Marine’s management commented that: “The fundamentals driving the marine and offshore industry remain intact underpinned by healthy oil prices and projected increases in offshore exploration and production (E&P) spending. Demand for rigs is expected to remain strong given the ageing rig fleet and the increasing focus by oil companies for new, safer and more efficient rigs, in particular high specification rigs capable of operating in harsh and deepwater environment.

For ship repair, there is continued demand for upgrading and life extension work for LNG carriers as well as repair and upgrading work for cruise ships and offshore vessels. Demand for the Group’s big docks remains strong.

Overall, enquiries remain healthy across the Group’s diverse business segments of ship repair, ship conversion & offshore platforms and rig building. However, competition is intense and impacts margin.”

At Friday’s closing price of $4.26, shares of Sembcorp Marine are exchanging hands at 16 times its last 12 months’ earnings and have a divided yield of 3% based on last year’s full year pay-out.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.