SembMarine, Sembcorp Industries shares rise despite full-year losses

• Sembcorp Industries (SGX: U96) share price gains 2.5% to S$1.66 a share
• Analysts remained largely bullish on SCI, foreseeing a recovery
• Sembcorp Marine (SGX: S51) share price reaches S$0.155 apiece
• OCBC noted ‘multiple headwinds’ ahead for SMM
• Trade Sembcorp Industries and Sembcorp Marine, long or short, with a live or demo IG account

Sembcorp Industries: ‘Resilient’ energy, urban arms

Sembcorp’s (SCI) share price jumped 2.5% to close at S$1.66 on Tuesday, after reporting results for last year.

The group plunged into the red with a hefty S$997 million net loss, versus a profit of S$247 million in 2019. This included exceptional items and the discontinued marine business. Turnover shrank 19% to S$5.45 billion.

SCI group’s president and CEO, Wong Kim Yin, commented: ‘Despite the impact of the pandemic and difficult market conditions, the underlying performance of our energy and urban businesses remained resilient.’

Net profit was S$160 million for the energy arm, down from S$195 million in 2019, and S$92 million for the urban business, lower than S$117 million in the previous year.

Moving forward, SCI said its underlying performance may be affected by changes in the customer profile in the UK and Singapore, as well as the loss of income from divested assets in Panama and Chile.

As of Tuesday morning, six in 10 analysts rated SCI shares a ‘buy’, two recommended ‘hold’, and two said it was a ‘sell’, according to Bloomberg data.

UOB Kay Hian issued a ‘buy’ call last month with a S$2.02 target price. The research team wrote then that Sembcorp was ‘well positioned for recovery in 2021’, as successful vaccine trials brought greater certainty of a swifter-than-expected global economic recovery, thus increasing energy demand.

SCI proposed a final and total dividend of S$0.04 per share.

Sembcorp Marine: Challenging road ahead?

SembMarine’s (SMM) stock finished 2% higher at S$0.155 on Tuesday, on 104 million shares traded - one of the heaviest volumes on the bourse for the day.

Net loss worsened to S$583 million last year, from a S$137 million net loss in 2019, while revenue sank 48% to S$1.51 billion.

The topline figure was below some forecasts, including UOB Kay Hian’s expectations of S$2.04 billion revenue.

Gross loss was S$490 million for 2020, deeper than the S$92 million gross loss in 2019, mainly due to the Covid-19 pandemic delaying project execution, higher costs recognised for rigs and floaters as well as specialised shipbuilding projects, and inventories written down.

On Tuesday, OCBC said the outlook remained challenging given the relatively low oil prices, and ‘a recovery still looks to be a long way off’ with losses likely to continue.

Further risks include higher-than-expected capex requirements, risks relating to Brazil, and lower-than-expected new order flows, the analysts said, as they maintained a ‘hold’ rating with a S$0.145 fair value.

OCBC added: ‘We continue to see multiple headwinds on low order book clarity and capex requirements.’ Looking ahead, there remains the potential for impairments, and the still-tight financial position could limit the types of orders the group can pursue, the analysts wrote.

UOB Kay Hian last month kept a ‘sell’ call with a S$0.125 target, predicting that SMM’s financial position may deteriorate further in 2021 if its lack of orders persists.

How to trade Sembcorp stocks with IG

Are you feeling bullish or bearish on Sembcorp Industries and Sembcorp Marine’s stocks?

Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform, or by investing in the share directly, in a few easy steps:

1. Create a live or demo IG Trading Account, or log in to your existing account
2. Enter <Sembcorp Industries> or <Sembcorp Marine> in the search bar and select the instrument
3. Choose your position size
4. Click on ‘buy’ or ‘sell’ in the deal ticket
5. Confirm the trade