Poor Ship Repair Business May Hit Singapore Marine Firms

Continued weakness in the ship repair business is expected to hurt the 1996 earnings of Singapore's marine-based companies, analysts said on Wednesday.

The two major players, Keppel Corp and Sembawang Corp are due to announce in early March their full year results for the 1996 financial year ended December 31.

"We should see lower than expected profits from ship repair," Liew Yin Sze, chief economist at J M Sassoon said, referring to Keppel and Sembawang. Analysts said the ship repair business faced increased competition from low-cost yards in China and the Middle East.

Singapore also has surplus dock capacity, they said. The situation had not improved in 1996 and a turnaround was not expected in the near future, they added.

 

Liew said, "It was not a positive year for the ship repair segment. We see it more as a structural than a cyclical problem,".

The latest estimate directory showed a consensus forecast for Keppel's net 1996 profit at S$221.9 million (US$157.38 million), up 3.65 per cent from S$214.09 million in the previous year.

Several broking houses said they recently downgraded Keppel Corp's 1996 earnings.

"We are downgrading our profit forecast for Keppel Corp by six per cent for the fiscal year 1996," said an analyst at a local research house. He revised Keppel's 1996 earnings to S$204.2 million from S$217 million previously.

Frasers Securities said it had revised Keppel's earnings down to $215 million from S$219 million while GK Goh Securities maintained its projection at S$217 million.

Research houses have projected Sembawang's 1996 net profits between S$31 million and S$37 million, down from S$40.19 million a year ago.

"While Semb Corp received more repair work in the fourth quarter last year, these were extraordinary repairs, not an indication of a turnaround in the sector," an analyst with a European broking house said.

Liew added that Sembawang's earnings would be hurt by keen competition in the engineering sector.

Its performance would be dampened by high start-up costs in the Internet business, a recent diversification for Sembawang, another analyst said.

Sembawang is involved in marine engineering and has a stake in one of Singapore's Internet Service Providers, Pacific Internet, through its unit Sembawang Media.

Analysts said they did not see contributions from the Internet business to Sembawang until 1998 at the earliest. Keppel would get some reprieve from its non-core financial and property activities, they added.

"The gains for Keppel would come mostly from its subsidiaries like real estate unit Straits Steamship Land (SSL), and Keppel Bank " Liew said.