3 things you must know about Singapore rigbuilders' latest profits

Robust demand, stiff competition.

According to OSK DMG, the recent earnings season ended with more negative than positive surprises. The highlights were firstly, there are no surprises among the large-caps, as rig builders’ operating margins beat our estimates but missed on revenue.

Secondly, MTQ surprised on the upside with subsea improvement; and lastly, OSK DMG cut TGH and AUSG to Sell on poor results and weak visibility, but stay Neutral on the O&M sector.

Here's more from the report:

Rig demand robust but stiff competition again the highlight. Rig builders reported earnings that were in line due to better-than-expected operating margins although revenue was slightly below forecast.

Meanwhile, company managements kept their long-term operating margin guidance of 10% to 13%. Keppel (KEP)’s SGD13.1bn-strong order book and SMM’s SGD13.6bn in orders will keep both companies’ yards busy but it is unlikely that they would see significant jumps given the already high base.

We see little upside to our TPs as rig-building earnings growth is largely flat.

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