Delayed worker levy hikes to buoy marine sector by $5m

Firms could save costs of $50-$100 per foreign worker.

The foreign worker levy hikes in the marine sector will be deferred by one more year until the end of June 2019, due to cyclical weakness. According to DBS Equity Research, this brings about cost savings of $50 and $100 per basic tier R1 and R2 worker respectively, which levies stay at current $300 and $400 respectively. It is expected that the move could save Keppel O&M and Sembcorp Marine $3m-$5m respectively in 2017 to 2018. DBS analyst Andy Sim said, "Whilst this may not be a very significant amount, every bit helps given the challenging operating environment and plunge in profitability."

It has been a tough time for Singapore's shipbuilders over the past three years, but things may be improving. Certainly holding off increasing the price of labour will help struggling ship builders. Meanwhile, Singapore's rig builders are poised to bag more deals for rig production in 2018, thanks to higher oil prices and reduced project costs, DBS Equity Research said. According to a report, higher oil prices are a "harbringer" for contract flows, which is a company's leading indicator of earnings growth. Oil prices are currently sustaining above US$60/bbl. Amongst the rigbuilders, Sembcorp Marine (Sembmarine) can bag over $3b, potentially translating to firm orders for the next 12 months.

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