Global shipping sailed into a perfect storm of adverse conditions in 2011. With trade down, fuel prices rising, and a glut of vessels, the Guggenheim Shipping ETF (SEA, quote) took a dive. Sembcorp Marine (SMBMF, quote) fell on hard times as well, but the Singapore-based repair company offers a lot as shipping begins to recover.
Sembcorp’s last set of earnings show that the company’s fundamentals are strong. It earned a net profit of $523 million in the first three quarters of 2011.
Shares of Sembcorp have been rising since the beginning of the year as new repair contracts have been announced. The company also has repair work booked through the second quarter of 2014.
There’s also new construction work to be had. The company’s Brazilian shipyard recently secured a contract worth approximately US$792.5 million for the design and construction of a cutting-edge drillship. The contract represents steady business for Sembcorp, as the new ship will take almost three years to build.
Sembcorp will report its next set of earnings on February 20, which should give us a better picture of its prospects in 2012. The stock trades thinly in the United States, but is a major part of the Guggenheim Shipping ETF (SEA), which devotes 7.03% of its portfolio to Sembcorp.