Sembcorp Marine & Kepcorp

US crude surges 3.6%, settling at $70.53, after State Dept says oil buyers must cut Iranian imports to zero

• Oil prices spiked after the State Department signaled the Trump administration will take a hardline approach to cutting off Iran's oil exports.
• A State Department official told reporters the administration expects oil buyers to completely cut off purchases of Iranian supplies in early November.




• Oil prices were already facing upward pressure due to declining production in Venezuela and elsewhere at a time of high global demand.(cnbc.com)

With oil price crossing the $70 mark again, looks like it may attract investor investing in Oil drilling business and hence may boost the demand for new Rigs order.

This may likely benefit both Sembcorp Marine & Keppel Corp.

With this piece of good news, I think Sembcorp Marine may Gap up and retest $2.10 then $2.20 level. 

Keppel Corp may retest $7.20 then $7.40 .

Sembcorp Marine:

NAV of $1.157.

EPS is down 86% to 0.25 cents versus 1.77 cents .

PE is rather high at current price of $2.03 that is a PE of 45.1x ( estimated full year PE of 4.5 cents).

I think The current price of $2.03 is running ahead of its financial fundamentals.

Dividend of 2 cents per annum.

Yield is rather low at 0.98%.

Not a call to buy or sell.

Please do your own due diligence.

Sembcorp Marine Ltd, an investment holding company, provides offshore and marine engineering solutions worldwide. 

The company engages in the turnkey design, engineering, procurement, construction, and commissioning of offshore newbuilding and conversions, FSOs, FPSOs, FDPSOs, FPUs, MOPUs, gas terminals, FLNGs, FSRUs, jack-ups, semi-submersibles, drill ships, SSP solutions, TLPs, and SPARs. It also engages in the repair, refurbishment, retrofitting, life-extension, upgrading, and conversion of vessels, marine and offshore structures, LNG and LPG gas carriers, cruise ships, ferries, mega-yachts, floating production vessels, MODUs, tankers, containers, and cargo ships, as well as offers jumboization and dejumboization solutions. In addition, the company offers afloat and emergency repair, underwater cleaning and repair, main engine maintenance and repair, steel and pipe work, electrical and instrumentation repair, mechanical and motor rewind repair, tank cleaning, sludge and oily waste disposal, staging work, hydro jetting and hydro/vacuum blasting, riding crew and voyage repair, specialized workshop repair and reconditioning, vessel towage and port clearance arrangement, specialists service and navigation, automation, safety, and fire protection services. Further, it offers offshore platform solutions, such as integrated process; production, riser, and drilling; wellhead, power generation, manifold, and accommodation platforms; and wind-farm substations, as well as topside modules fabrication, installation, and integration. Additionally, it designs and builds sophisticated, specialized, gas value chain, ferry, RoPax, cruise, renewable energy and offshore support, naval support and security, and research and scientific survey vessels. The company was formerly known as Jurong Shipyard Ltd and changed its name to Sembcorp Marine Ltd in 2000. The company was founded in 1963 and is headquartered in Singapore. Sembcorp Marine Ltd. is a subsidiary of Sembcorp Industries Ltd.

 KepCorp - Looking through their financial results for the past 5 years , we can notice that the Total revenue has been declining substantially from 13,282.979m in 2013 to 6,185.668 in 2017.

 I think it is still quite far away for them to grow and increase their total revenue to hit the 10B value. Similarly , the Total net income has also been decreasing from 1,884.798m in 2013 to 301.668m in 2017.

 Diluted EPS has also been going downhill from 0.504 in 2013 to 0.231 in 2017.

 Dividend is almost below half of what has been declared in 2013 of 0.48 versus 0.22 in 2017.

 Diluted EPS of 0.231 , PE is about 35.2 times. I think it is still quite a little bit high as compare to its usual PE of about 13-15 times.

Looking at the latest 1st quarter result which was being released on 

Singapore, 19 April 2018 – Keppel Corporation Limited (Keppel) reported a net profit of S$337 million for the first three months of 2018, 34% higher than the S$252 million net profit for 1Q 2017, bolstered by higher contributions from the Property Division. 

The Group achieved revenue of S$1,470 million for 1Q 2018, which was an improvement of S$222 million or 18% over 1Q 2017. The increase was underpinned by higher revenues achieved by the Property and Infrastructure divisions, which mitigated the impact of lower work volume in the Offshore & Marine Division.

I think the total net profit has also factored in the divestment gain of 289m from the property division.

I think without this divestment gain, net profit may be about the same level as in 1st quarter 2017.

So my observation is that, it may still take quite sometimes for the company to achieve the same level of  net profit as in year 2013.

The current price of $7.09 seems to be trading at a premium level as compare to its NAV of $6.311.

On a positive note , the total order book has generally increased to 4.3B as per the table below:

Another piece of good news is that they have been able to secure a first newbuild drilling rig order in 3 years.

Not a call to buy or sell.

Please do your own due diligence.

Keppel Corporation Limited, an investment holding company, engages in the offshore and marine, property, and infrastructure businesses in Singapore, China, Brazil, other Far East and ASEAN countries, and internationally. It constructs, fabricates, and repairs offshore production facilities and drilling rigs, power barges, specialized vessels, and other offshore production facilities; researches and develops deepwater engineering works; engineers, constructs, and fabricates platforms for the oil and gas sector; undertakes shipyard works and other general business activities; and procures equipment and materials for the construction of offshore production facilities. The company is also involved in the trading and installation of hardware, industrial, marine, and building related products; provision of leasing services; sourcing, fabricating, and supply of steel components; ship repairing, shipbuilding, and conversion activities; marine contracting and ship owning business; painting, blasting, and process and sale of slag; property investment, management, and development activities; fund management; golf and hotel ownership and operation; development of marina lifestyle and residential properties; trading of construction materials; development of district heating and cooling systems; electricity generation and supply, and general wholesale trade businesses; purchase and sale of gaseous fuels; and trading of communication systems and accessories. In addition, it offers jacking systems, and heavy-lift equipment and related services; project management and procurement, towage, financial, real estate investment trust management, logistics and supply chain, warehousing and distribution, data center facilities management, travel agency, and metal fabrication services; housing services for marine workers; and technical consultancy for ship design and engineering works, as well as solid waste treatment solutions. The company was incorporated in 1968 and is based in Singapore.