CIMB Research and DMG & Partners Securities cut their target prices on Singapore’s Sembcorp Marine after the world’s second-largest rig builder reported a 4.6% fall in second-quarter net profit to $142.8 million.
Sembcorp Marine shares were down 0.6% at $4.85 on Friday. The stock has risen about 27% so far this year versus the nearly 15% gain in the broader Straits Times Index.
CIMB cut its target price to $5.85 from $6.50, after reducing its earnings per share (EPS) estimates by 6-11% for Sembcorp’s 2012-2014 fiscal years.
CIMB said Sembcorp’s first-half core net profit was weaker than expected as the company executed lower-margin projects secured during the 2009-2010 order drought. The weakening U.S. dollar and euro also dragged margins down, it added.
But sustained high oil price, stronger pick-up in the second half of 2012 and order flows could be the stock’s catalyst, said CIMB, which has an outperform rating on Sembcorp.
DMG lowered its target price to $5.70 from $5.80, after cutting its EPS estimates by 5% for the 2012 fiscal year and by 10% for 2013 on lower margin assumptions, and kept its buy rating.
Sembcorp maintained its operating margin target of 14-15% for 2012 as it expects margins to improve once the higher-priced jack-up rig orders are executed, the broker noted.
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