Sembcorp Marine's strong 1Q11 margins offset by lower revenue

Gross profit margin soared 23.5% in the first quarter although net profit fell 39% YoY to S$151mln.

The margin jumped significantly compared to14.1% in 1Q10.

In a statement, DMG Research said it is optimistic that earnings in subsequent quarters will be stronger on the back of higher revenue billings and profit recognition from the Songa project.

The drop in Sembcorp Marine's 1Q11 revenue was attributed to lower billings from its order book as the new jackup orders are still in the planning stage.

SMM has 11 jackup projects in its order book valued at S$2.4b and eight options valued at S$2b yet to be exercised.

The analyst said the offshore company remains bullish on the O&M outlook and expect to grow its net order book.

Its current order book stands at S$5.2bln, with deliveries extending up to 2014. This excludes the S$2bln options for eight jackup rigs given to various customers.

"Given the tightening yard space for offshore projects, we believe pricing power has returned to the yards and SMM is in a good position to cherry pick new orders,” DMG Research said.

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