OCBC has trimmed its target price on Sembcorp Marine from $2.62 to $2.20 on prospects that the oil market will remain weak and recovery is uncertain.
“Over the longer term, we expect oil prices to recover, and by extension the offshore sector as well. The question, however, is when,” states OCBC in a Sept 10 report, which keeps its “hold” call on the stock.
Crude oil prices have dropped some 35% from end June to a low of US$38 per barrel for West Texas Intermediate benchmark in the last week of August. There has been a recovery of around 20% to US$45 per barrel, but that was seen to be driven by short-sellers trying to cover back their positions.
“While short term oil prices have increasingly been under the mercy of traders, longer term prices are still tied to the physical market,” states OCBC.
OCBC notes that Sembcorp Marine still has a net order book of $10.9 billion but half of that comes from the troubled Sete Brasil. “There is still a lack of clarity when Sete would resume its payments, and there is increasing concern over the viability of the last few rigs,” the brokerage states.
OCBC has lowered its valuation from 12 times to 10 times which translates into a fair value of $2.20, down from $2.62.
As at 10.26am, Sembcorp Marine was down 7 cents to $2.36.
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“Over the longer term, we expect oil prices to recover, and by extension the offshore sector as well. The question, however, is when,” states OCBC in a Sept 10 report, which keeps its “hold” call on the stock.
Crude oil prices have dropped some 35% from end June to a low of US$38 per barrel for West Texas Intermediate benchmark in the last week of August. There has been a recovery of around 20% to US$45 per barrel, but that was seen to be driven by short-sellers trying to cover back their positions.
“While short term oil prices have increasingly been under the mercy of traders, longer term prices are still tied to the physical market,” states OCBC.
OCBC notes that Sembcorp Marine still has a net order book of $10.9 billion but half of that comes from the troubled Sete Brasil. “There is still a lack of clarity when Sete would resume its payments, and there is increasing concern over the viability of the last few rigs,” the brokerage states.
OCBC has lowered its valuation from 12 times to 10 times which translates into a fair value of $2.20, down from $2.62.
As at 10.26am, Sembcorp Marine was down 7 cents to $2.36.
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
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