SembMarine’s shares have tumbled for two sessions, but Nomura stays positive on the stock

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Sembcorp Marine’s shares tumbled for a second day, shedding 3.86 percent to S$2.24 by 2:49 P.M. SGT.

That was on top of Thursday’s 11.4 percent drop.

Nomura attributed the share drop to weak fourth-quarter results, a weak earnings outlook, especially for the first half of 2018, and new yard capex ahead.

Additionally, “market speculation relating to SembMarine’s privatisation was also laid to rest today after Sembcorp Industries announced the results of its strategic review,” Nomura said in a note on Friday.

The market had been watching for some form of corporate exercise from Sembcorp Industries, ranging from privatizing SembMarine, divesting it entirely, reducing its stake or a dividend in specie. But none of that was forthcoming.

’Tempering Optimism’

But Nomura said it was “tempering optimism but staying positive.” It stuck with a Buy call on SembMarine’s shares, with an unchanged S$2.70 target price.

“Overall, we believe as Brent oil prices remain strong, offshore and marine fundamentals continue to improve, slowly but sustainably,” Nomura said.

The bank said it liked SembMarine for its improving new order book, as a pure offshore and marine play, improving gearing and a “clean” order book with no delayed orders.

But Nomura still noted that it expected earnings for the first half of 2018 would likely be weak on low revenue recognition trends and because the company has yet to book a S$24 million loss related to the West Rigel semi-sub sale.

Selling pressure on SembMarine’s shares may be easing, and the day’s low of S$2.17 may act as suppport.

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