Which Is The Better Oil & Gas Investment? Sembcorp Marine Ltd vs. SapuraKencana Petroleum Bhd

Despite a recent rebound to the mid-US$30’s range from a low of near US$30, the price of oil is still down hard from over US$100 per barrel in mid-2014. The oil price crash has badly hurt the businesses of many oil & gas companies and caused their shares to fall sharply.

The lower share prices sets up bargain-hunting opportunities, especially if the price of oil recovers. With this in mind, let’s take a look at two prominent oil & gas plays in the region, Singapore’s very own Sembcorp Marine Ltd (SGX: S51) and the Malaysia-listed SapuraKencana Petroleum Bhd (KLSE: 5218.KL). Which of the two may be the better oil & gas investment?

The business

SembCorp Marine is a leading fabricator in the offshore and marine space. The company builds offshore rigs, floaters, offshore platforms, and other specialized vessels. SapuraKencana, on the other hand, has a more integrated business model. The company provides the full range of services and solutions in the upstream oil & gas value chain. It has the capabilities to construct, install, commission, and decommission an oil and gas exploration project.

The two companies are similar in size at the moment with Sembcorp Marine and SapuraKencana having market capitalisations of S$3.4 billion and RM11.3 billion (S$3.8 billion) currently.

Operational efficiency

Due to the poor market conditions last year, both Sembcorp Marine and SapuraKencana had recorded a net loss over the past 12 months.

But, a look at both companies’ average returns on asset and returns on equity will show that Sembcorp Marine has better operational efficiency. From 2010 to 2014, Sembcorp Marine had generated an average return on asset of 7.8% and an average return on equity of 26.6%. SapuraKencana, on the other hand, had lower averages over the same period of 5.3% and 17%, respectively.


At its current share price of S$1.61, Sembcorp Marine has a price-to-tangible book value of 1.4. Meanwhile, SapuraKencana looks to be the pricier stock; the company is valued at 2.8 times its tangible book value at a share price of RM1.91.

Foolish Summary

In summary, both Sembcorp Marine and SapuraKencana are focused on the upstream portion of the oil & gas value chain, both are prominent players in the region, and both are quite similar in size. But of the two, Sembcorp Marine seems to be the company with the better operational efficiency and lower valuation.

It should be noted, however, that what you’ve seen about the two companies here shouldn’t be taken as the final word on their investing merits. They are just useful starting points for further research.

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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 writer Stanley Lim does not own shares in any companies mentioned above.