Could the Marco Polo scuffle trigger a dreary domino effect for SembMarine?

It’s the first formal cancellation for SMM.

The termination of Marco Polo’s USD214.3m contract with SMM is deeper than the problem at hand, as analysts say it could be a dangerous precedent for the company’s other clients.

According to analysts from Maybank Kim Eng, even if SembMarine did not breach its contract obligations, other clients may be compelled to copy Marco Polo’s actions.

“SMM has five other rigs (2 under Perisai, 3 under Oro Negro) that could also be at risk. Delivery dates for these units have been deferred for now. SMM should have recognised a large part of this contract given that it was due for end-2015 delivery,” Maybank Kim Eng said.

Meanwhile, they add that if it cannot claim the amounts due or resell the units, SembMarine may have no choice but to reverse the recognised profits.

Furthermore, SMM has already refuted Marco Polo’s allegations, citing a breach of contract.

“SMM is terminating this contract on its end and claiming its amounts due,” Maybank Kim Eng said.