Towards Financial Freedom
DBS Equity Research: Wired Daily 16 Feb 2016
Today's Focus
Sembcorp Marine (SMM) swung into a net loss of S$537m for 4Q15, from net profit of S$178m a year ago. While lossmaking is expected, as guided in its profit warnings early Dec-2015, the provisions incurred were much bigger than expected, at >S$600m. S$329m for Sete projects and ~S$280m for other rigs. In addition, SMM shared net loss of approx S$150m from associate, Cosco. This was partially offset by tax credit of S$118m. Stripping these out, SMM would have reported core profits of approx S$100m in 4Q15. For FY15, SMM posted a net loss of S$290m, a far cry from S$560m net profits in FY14. Core net profit would have been positive at S$384m. SMM declared 2 Scts final dividend, bringing full year DPS to 6 Scts, down from 13 Scts p.a. in the past three years. This translates to 4% yield and works out to be 33% payout ratio based on core profit, down from the average of 50% previously. We cut FY16- 17F earnings by 33-37% after pushing back the delivery timelines of Sete Brasil projects and lowering EBIT margins by up to 1.4ppt. Reiterate FULLY VALUED on SMM with a lower TP of S$1.24 (Prev S$1.35) based on 1.0x FY16 P/B, reflecting the fall in book value post provisions.
Cosco posted a net loss of S$484m in 4Q15, bringing full year losses to S$570m. In 4Q15, Cosco made impairment/provisions of S$305m for bad debt, S$289m for inventories and S$42m for cost overrun, totaling S$636m. Net gearing stood at an alarmingly high level of 3.7x as of end Dec-2015, from 2.2x a quarter ago, arising from the deferments and deteriorating payment term, aggravated by the impaired book value.
Mermaid issued a profit warning, guiding for full-year losses for FY15, mainly attributable to significant non-cash provisions for impairment on the value of key assets, investments in subsidiaries as well as share of loss in an associate investment. This implies a big kitchen sinking impairment exercise on both its own subsea vessels and tender rigs as well as drilling rig associate AOD, on the back of challenging industry environment amidst the weak oil prices. Mermaid reported net earnings of US$16.3m in 9M15.
Source: DBS
- Sembcorp Marine - Huge provision drags FY15 into losses. Maintain FULLY VALUED; TP lowered to S$1.24
Sembcorp Marine (SMM) swung into a net loss of S$537m for 4Q15, from net profit of S$178m a year ago. While lossmaking is expected, as guided in its profit warnings early Dec-2015, the provisions incurred were much bigger than expected, at >S$600m. S$329m for Sete projects and ~S$280m for other rigs. In addition, SMM shared net loss of approx S$150m from associate, Cosco. This was partially offset by tax credit of S$118m. Stripping these out, SMM would have reported core profits of approx S$100m in 4Q15. For FY15, SMM posted a net loss of S$290m, a far cry from S$560m net profits in FY14. Core net profit would have been positive at S$384m. SMM declared 2 Scts final dividend, bringing full year DPS to 6 Scts, down from 13 Scts p.a. in the past three years. This translates to 4% yield and works out to be 33% payout ratio based on core profit, down from the average of 50% previously. We cut FY16- 17F earnings by 33-37% after pushing back the delivery timelines of Sete Brasil projects and lowering EBIT margins by up to 1.4ppt. Reiterate FULLY VALUED on SMM with a lower TP of S$1.24 (Prev S$1.35) based on 1.0x FY16 P/B, reflecting the fall in book value post provisions.
Cosco posted a net loss of S$484m in 4Q15, bringing full year losses to S$570m. In 4Q15, Cosco made impairment/provisions of S$305m for bad debt, S$289m for inventories and S$42m for cost overrun, totaling S$636m. Net gearing stood at an alarmingly high level of 3.7x as of end Dec-2015, from 2.2x a quarter ago, arising from the deferments and deteriorating payment term, aggravated by the impaired book value.
Mermaid issued a profit warning, guiding for full-year losses for FY15, mainly attributable to significant non-cash provisions for impairment on the value of key assets, investments in subsidiaries as well as share of loss in an associate investment. This implies a big kitchen sinking impairment exercise on both its own subsea vessels and tender rigs as well as drilling rig associate AOD, on the back of challenging industry environment amidst the weak oil prices. Mermaid reported net earnings of US$16.3m in 9M15.
ComfortDelgro's (CD) 4Q15 net profit grew by 7.1% y-o-y to S$68.2m, while revenue reached S$1.06bn. For FY15, CD's net profit ended at S$302m (+6.5% y-o-y) on the back of 1.5% growth in revenue to S$4.11bn. A final DPS of 5 Scts was proposed, up from FY14's 4.5 Scts. We upgrade our recommendation for CD to BUY (from HOLD) with a revised TP of S$3.24 (Prev S$3.00). Share price has weakened by c.8% YTD and we believe this presents an opportune time to accumulate as oil prices have dropped c.20% YTD, which bodes well for margins.
UOB reported results this morning. Net profit for 4Q15 came in at S$788m (-8% q-o-q; flat y-o-y) bringing full year 2015 earnings to S$3,209m (-1% y-o-y) - inline. Net interest income improved q-o-q thanks to higher NIM (net interest margin) at 1.79% (+2bps q-o-q; +10bps y-o-y) while loans grew by 2% q-o-q, 4% y-o-y, driven mainly by its Singapore operations. Deposits however decline by 2% q-o-q although rose 3% y-o-y. On a full year basis, NIM stood at 1.77% (FY14: 1.71%). Provisions were higher at S$115m in 4Q15 (3Q15: S$56m) due to higher specific allowances from new NPLs (non performing loans) from Singapore, Indonesia and Greater China. Final DPS of 35 Scts was declared bringing full year DPS to 90 Scts. More updates after briefing today. January remained a quiet month with 322 private residential transactions (478 units, including executive condominiums). Developers focused on clearing existing inventory while launching only c.146 units. Major re-launches at The Glades (80 units launched, 12 units sold), The Poiz Residences (20 units launched, 26 units sold) and Vue 8 Residence (20 units launched, six units sold). We believe that the residential volume is likely to remain lacklustre in 2016 and expect developers to clear existing inventories. Potential positive catalyst that could re-rate the sector is the potential relaxation of property policies. Picks: CapitaLand, City Developments, Frasers Centrepoint Ltd.
Chip Eng Seng Corp said it would drop plans to spin off its subsidiaries that are in the construction business. The company has decided not to proceed with the proposed restructuring, having taken into account numerous factors, such as prevailing market conditions, amongst others. The company had intended to list the restructured entity on the mainboard.
Business confidence in Singapore bounced back from a fouryear low in the fourth quarter of 2015, but remains largely pessimistic and worse than global levels, according to the Global Economic Conditions Survey by the Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants. The survey's confidence index for Singapore recovered to between -55 and -60 in the fourth quarter from between -70 and -75 in the third quarter, where a negative score represents pessimism. The confidence index globally was between -20 and -30 in the fourth quarter.
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