Rig builders Keppel, SembMarine gain despite Brazil woes as crude holds above US$45

Keppel FELS employees stand amongst jackup rigs at their shipyard in Singapore.
Keppel FELS employees stand amongst jackup rigs at their shipyard in Singapore. PHOTO: REUTERS

SINGAPORE - Shares of rig builders Keppel Corp and Sembcorp Marine jumped early on Thursday (April 28) after US government data showed a fall in crude output, giving hope to punters that oil prices will continue to recover.

At around 10.10am on Thursday, Keppel shares rose as much as 2.7 per cent to S$5.66, while shares of SembMarine rose as much as 3.6 per cent to S$1.73. Keppel later traded at S$5.60 and SembMarine at S$1.71 levels as at 11.35am.

Brent crude was trading at US$47 levels, after rising above US$45 a barrel for the first time since November.

The Straits Times index was up 0.22 per cent at 2,881.09.

On Wednesday (April 27), SembMarine posted a 48 per cent fall in first quarter net profit on project deferments and a jump in financing costs. Analysts are divided on their outlooks for SembMarine.

RHB Singapore Research has mantained a "neutral" call on SembMarine, with a target price of S$1.51.

KGI Fraser Securities has upgraded the stock to "hold" as oil prices pick up, whereas OCBC Investment Research is standing by its "sell" position.

SembMarine is expected to deliver at least four major projects by the end of this year, which would result in a cash inflow of S$1.5 billion to S$2 billion, said OCBC analyst Low Pei Han.

"Our current estimates assume that payments on the above projects materialise, but there could be downside risk given the difficult operating environment."

Shares of Keppel and SembMarine have been held down since the start of the year as the fates of the two rig builders' incomes were tied to the financial woes of top customer and oil rig supplier Sete Brasil, which filed for bankruptcy earlier this week.