With FY09/10E P/E of 12.3x and 12.1x, SMM still trades at the lower end of its historical P/E band of 7x and 28x. FY09/10F ROEs of above 31.6% and 26.8% are creditable for a shipyard group, in our view, and we expect dividends to be maintained for FY09F and FY10F, giving dividend yields of 4% which as attractive relative to peers.
SMM holds net cash of S$1.8bn as at March 2009, of which S$1.2bn are WIP payments, with steady cashflow seen from progressive recognition from its S$9bn order-book. Given that capex requirements can be met from its operating cashflow, we believe the group is unlikely to need to raise capital in the short to medium term Risks to price target: Our price target could be negatively affected by extensive cancellations of the group's O&M orderbook, or by significant losses incurred on these O&M projects, or more associate losses.
Sensitivity analysis. If we assume a 10% cancellation of the group’s offshore rig contracts from its current orderbook, our FY09/10/11 earnings estimate will fall by 8.3%, 7.2% and 6.8%, respectively. Our current earnings forecast already takes into account all announced cancellations and delivery postponements.
Click here for more Offshore Marine Stocks Technical Analysis
Sponsored Links
Comments
No response to “SembCorp Marine - Price target maintained at $3.22”
Post Comments (Atom)
Post a Comment |
Post a Comment