With reference to SembMar 1H FY08 result reported on 5th Aug 08, followings are a brief summary of the result.
1. Revenue for 1H FY08 up 15% to $2.3b as compared to 1H FY07 of $2.0b.
2. Gross Profit for 1H FY08 up 46% to $234.7m as compared to 1H FY07 of $160.9m.
3. Operating Profit for 1H FY08 up 29% to $190.9m as compared to 1H FY07 of $148.1m.
4. Net Profit for 1H FY08 up 39.7% to $227.3m as compared to 1H FY07 of $162.7m.
5. EPS for 1H FY08 up 37.2% to 10.62 cents as compared to 1H FY07 of 7.74 cents.
6. Cash flow for 1H FY08 was $1.432b as compared to 1H FY07 of $672.7m.
7. NAV for 1H FY08 dropped 17.4% to 53.30 cents as compared to 1H FY07 of 64.56 cents.
8. Order book at $9.6b and stretches deliveries and completion till 2012.
The 15% increase in revenue for 1H FY08 was mainly due to higher revenue recognition from rig building, ship conversion/offshore and ship repair businesses. The 29% increase in operating profit for 1H FY08 was mainly due to higher operating margins from rig building and ship repair businesses and better contribution from associated companies. On the outlook, SembMar expects ship demand to remain buoyant, driven mainly by Asian oil and bulk commodity demand amid fears of slow down and inflationary pressures in US and Europe. The company also believes in the fundamentals for the offshore market remain strong due to the positive growth in the global demand for oil and gas. New rig orders remain bullish with increasing demand for deepwater rigs. The positive outlook for the offshore production market will see increasing demand for fixed and floating production systems, including FPSO units.
In response to its 1H FY08 result, below is the analysts' view.
1. JP Morgan maintains overweight but cuts target price to $4.80 from $5.20
2. OCBC maintains buy rating and set target price of $4.98
3. UBS maintains buy rating but cut target price from $5.40 to $5.00
4. Citigroup maintains buy rating with unchanged target price of $4.95
Based on a conservative estimation that SembMar is able to maintain its current performance for the rest of FY08, a projected FY08 EPS would be 21.24 cents. At closed price of $3.75 as of 8th Aug 08, this translates to a 17.6x FY08 PE. Personally, on a conservative valuation, SembMar would be fully valued at $4.50 for FY08, which translates to 21.2x FY08 PE. Below is a list of valuation based on a conservative FY08 EPS of 21.24 cents.
21.2x PE -- $4.50
20x PE -- $4.23
18x PE -- $3.82
16x PE -- $3.40
15x PE -- $3.19
12x PE -- $2.55
10x PE -- $2.12
As SembMar is the #2 rig builder behind KepCorp, a valuation of 10x PE or less would be a very attractive price for investors, who are bullish on its future, to enter. This would provide a 112% upside for a fair value at $4.50.
