ST Marine braces for more headwinds

But it could hope for US defense budget hike to stay afloat.

ST Engineering has guided for lower marine revenue and profit before tax on decline in contributions from shipbuilding and engineering segments, offset by ship repair segment, on the back of persistent headwinds in the oil & gas industry.

OCBC Investment Research however believes that ST Marine's margin decline could be mitigated should newly elect-President Donald Trump decides to raise defense budget.

Here's from OCBC:

With the uncertain outlook over the Oil & Gas sector, we expect nearterm headwinds to persist, with weakness in the marine business to continue.

Management also added that given the challenges, and intensified competitive environment, ST marine may be compelled to bid for projects in the future at margins lower than previous or existing projects.

All said, we do not expect marine’s decline to be drastic due to its exposure to military projects as well. If U.S. naval defence budget increases under the newly elected president, then in our view, we believe the impact on ST marine will be positive as a result.

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