Keppel and Sembmarine's order books could already be at $4b and $3.5, respectively.
Singapore's shipyards reversed their three-year order slump as their orders in the first quarter of 2018 exceeded those in H1 2017, CGS-CIMB said. According to a report, the order books of Keppel and Sembmarine at end-Q1 likely stood at $4b and $3.5b for Sembmarine, excluding Sete Brasil and Borr Drilling.
Keppel and Sembmarine only secured $300m and $75m, respectively, in H1 2017. In Q1, Keppel has secured $580m worth of contracts, comprising a semi-submersible from Awilco (US$425m) and dual-fuel bunker tanker (US$10m). Sembmarine matched with a US$350m-400m hull and living EPC contract for TechnipFMC.
CGS-CIMB analyst Lim Siew Khee noted that with no kitchen-sinking provisions in 4Q2017, the yards could achieve better QoQ performance with narrower losses or breakeven. "Yard utilisation was still likely weak as the contracts momentum only picked up in 2H17 with at least a 6-month gap before any meaningful revenue recognition. We estimate EBIT margins were 1-3% due to high fixed costs. EBIT margin for Keppel O&M and Sembmarine ranged from 1-7% in 1Q2017 to 3Q2017," she added.
Moving forward, CGS-CIMB expects Keppel to beat Sembmarine's earnings for the quarter. Divestment gain from Keppel China Marina could bolster Keppel's profit by 50% to $390m. Meanwhile, Sembmarine likely missed on an annualised basis with $70m profit due to a "slight loss" and seasonally weaker ship repair revenue could have also dampened the overall operating leverage.
Lim added that the adoption of SFRS new accounting standards could also swing the quarter’s margins.
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