Here’s why Keppel has the upper hand against rival SembMarine

The latter is a pure marine group.

While Sembcorp’s marine segment may have outpaced its competitor in terms of contract wins this year, SembMarine remains more vulnerable to headwinds owing to its pure marine status.

According to analysts from UOB Kay Hian, being an exclusively maritime group has actually reflected in SMM’s 1H15 results, as they reported a 15% yoy decline in earnings. Keppel’s earnings, however, were flat at 1.6% yoy.

Meanwhile, adding to SMM’s woes are potential drastic losses due to contract cancellations. For instance, SMM faces a $97m profit reversal if Oro Negro cancels.

“If Oro Negro were to cancel the rigs, we believe SMM will be able to sell the rigs and recoup its costs when the market improves. However, it may need to reverse US$68m (S$97m) of profits recognised, assuming 15% operating margin and 100% completion,” UOB Kay Hian said.

On the other hand, despite weak contract wins and profits from Keppel’s offshore and marine division, the company can still bank on its more resilient property business.

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