
Plummeting profits to hound Singapore shipyards until 2021
Newbuild rig order numbers remain close to nil.
It’s going to be a long, harsh winter for Singapore shipyards, as a sustained period of low orders is a reality looming on the horizon.
According to a report by UOB Kay Hian, coupled with the expectation of near zero newbuild rig orders until 2020 and a dismal floating production services (FPS) market, the yards will suffer through lacklustre profits for at least the next five years.
Moreover, balance sheets will be stressed and the yards will scrape by through sheer skill and managing overheads. UOB Kay Hian noted that all this will of course change if oil prices spike significantly above US$60/bbl.
The report championed Keppel over Sembcorp Marine (SMM) to investors that still want to brave the space—Keppel can be propped up by its property, infrastructure, and investment businesses.
On the other hand, SMM’s earnings are wavering as it has no other business to diversify to, and risks its rig-building and conversion orderbook thinning.
“While gearing remains elevated for both yards, the influx of cash as they deliver on projects should bring it to bearable levels. It is difficult to conclude if those levels are comfortable gearing levels for the long winter,” asserted the report.
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