Sembmarine shares slide amid looming losses, ‘intense’ competition

Market sentiment on offshore play Sembcorp Marine took another hit on Monday following its first-quarter business update.

  • SembCorp Marine Ltd (SGX: S51) share price plunges to S$0.20 per share
  • Losses will continue for this year, the group warned in a business update
  • Its manpower shortage and supply-chain constraints could continue amid Covid-19
  • Analysts predict the stock could fall further to S$0.15
  • Buy and sell Sembcorp Marine shares with an IG account

SMM stock sheds more red ink on high volumes

The heavy sell-off in shares of Sembcorp Marine (SMM), seen since last Thursday, continued on Monday (03 May 2021), after the mainboard-listed offshore, marine and energy group said it expects losses to continue for 2021.

The counter dropped 4.8% on the day to trade at S$0.20 as of 11:18 SGT with some 68 million shares changing hands, making it the second most actively traded stock on the Singapore bourse.

More than a dozen married trades in SMM shares were done on Monday by then, according to Shareinvestor data.

Out of 13 analysts, eight recommended ‘hold’ on Sembmarine, four said to ‘sell’, while only one rated it a ‘buy’ as of Monday morning. The research teams’ average 12-month target price was S$0.15, according to Bloomberg data.

Most recently, Macquarie gave a ‘neutral’ recommendation with a S$0.16 target price, while CIMB analysts issued a ‘hold’ call alongside a S$0.14 target.

Labour shortage amid Covid-19 pandemic

Earlier on Monday morning, Sembmarine issued its interim business update for the first quarter of 2021, saying it continues to face supply-chain constraints and a shortage of skilled workers due to the Covid-19 pandemic.

‘Foreign workers who left Singapore over the past year could not return due to ongoing border controls in countries such as India and Bangladesh,’ Sembmarine noted. Singapore’s improving economy has also increased competition for foreign labour already in the city-state, resulting in attrition of labour to competing industries.

The manpower crunch thus affected the execution and scheduled completion of some of Sembmarine’s projects.

While the group is in talks with customers to coordinate and reschedule project completions, there has been no cancellation of any existing projects, it added.

The group’s operations could be further impacted by workforce supply and quarantine restraints, given the reintroduction of pandemic-related restrictions in recent weeks, including tighter border controls, Sembmarine said.

Sembmarine faces ‘intense’ competition for new projects

The group continued to focus on executing its existing order book of over S$1.89 billion, including S$0.29 billion of ongoing repairs and upgrades for delivery in 2021.

During the quarter, the group also secured multiple contracts for repairs and upgrades, including a long-term contract with a European operator of luxury cruise ships and yachts.

Competition for new projects remains ‘intense’, Sembmarine highlighted, even though there are increasing signs of active reviews of final investment decisions and improved visibility of orders. This comes amid improving market sentiment, but the post-Covid-19 recovery is still uncertain.

The group is actively tendering for more than 10 projects, especially in the renewable energy and gas solutions segment. A similar number of tenders are in progress for the process solutions segment, Sembmarine added.

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