SembMarine’s earnings miss masks an otherwise robust operational performance, Barclays says, noting the 3Q12 margin of 14% was significantly higher vs regional peers.
“The severe slowdown in the commercial shipbuilding industry has intensified competition in the offshore rig-building space, with regional yards aggressively bidding for offshore projects. Despite these headwinds, the Singapore rig-builders continue to deliver sector-leading margins and robust earnings. We continue to like the company for its ability to deliver best-in-class margins and returns.”
It tips near-term share price weakness as a good value opportunity, with the stock trading at 15x 2012 P/E vs its 10-year average of 16x P/E. It notes the record order wins year-to-date has driven SembMarine’s backlog to $14.8 billion, providing earnings visibility, with management highlighting rig orders’ continued positive outlook in 2012 and 2013.
It cuts its target to $6.50 from $7.00 after rolling valuations to FY13 and lowering 2012-15 earnings forecasts by an average 9% on management’s more-conservative margin guidance and cost assumption changes. It keeps an Overweight call. The stock is down 5.5% at $4.43.
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