MARKET TALK: SembMarine Recovery Delayed Until 2014 - CIMB

0927 GMT 6 November [Dow Jones] STOCK CALL: CIMB downgrades SembMarine (S51.SG) to Neutral from Outperform after 9M12 net profit came in below expectations at 60% of its FY12 forecast on lower-than-expected revenue.

“Although 3Q12 could be partially masked by a pick-up in 4Q12, the lower margin guidance of 10%-13% in 2013, due to learning curve effects for new designs and conservative provision for the Brazilian contracts, could spark earnings cuts and share price downtrend in the near-term.”

It cuts its FY12-14 EPS forecasts by 6%-17% and lowers its target to S$5.01 from S$5.85, after rolling over to FY14 forecasts, based on 15X P/E from 18X previously. It expects recovery is delayed until 2014.

“Margin expansion is likely only in 2014, with higher ship repair from new capacity and effects of repeated orders, if any.” But it adds, around US$6 billion worth of orders could be awarded to SembMarine from now through 2013, potentially catalyzing the share.

The stock ends down 6.0% at S$4.41.
[I]-Leslie Shaffer, © Dow Jones & Co[/I]