Sembcorp Marine (SMM) reported a 32% YoY fall in revenue and a S$78m net loss in 4Q19 compared to net profit of S$6m in 4Q18. This brought full year net loss to S$137m, vs. S$74m net loss in FY18. This loss was greater than expected on continued low overall business volume – both us and the street were expecting net loss of S$86m for the year.

Looking ahead, business activity levels remain low for all segments except for repairs and upgrades, which continue to improve, underpinned by IMO regulations that require installation of ballast water treatment systems and gas scrubbers. Challenges remain, in particular supply chain disruptions due to the COVID-19 virus outbreak, which could affect execution of projects. Competition remains intense for all business segments.

SMM expects the trend of losses to continue into 2020. Net order book stands at S$2.44b. Pending an analyst briefing, we put our Sell rating and fair value estimate of S$1.24 under review.

Source: OCBC Research - 20 Feb 2020