Phillip Securities Research in a May 10 research report says: "Sembcorp Marine reported 1Q11 turnover at $829 million (-39% y-o-y, -16% q-o-q) and 1Q11 net profit at $152 million (+ 0.1 y-o-y, -41% q-o-q).
"The results were well in line with expectations with turnover and net profit constituting 23% and 19% of FY2011 forecast respectively. Although revenue fell 39% y-o-y, which was well flagged earlier due to the rig order drought in 2009, gross profits remain relatively unchanged due to a sharper drop in cost of sales.
"Our SOTP based target price of $6.60 implies a valuation of 18x FY11E earnings, which we feel is undemanding given that the company has impressive margin growth and we have not factor in potential contract wins from Petrobras. With an upside of 21.2% to its last trading price, we maintain our Buy call on SMM at an unchanged target price of $6.60. MAINTAIN BUY."
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