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Wed Sep 30 2020 – 4:27 pm
Shares of SEMBCORP Marine (SMM) rose 2.8 percent on Wednesday following Keppel Corporation’s Vision 2030 update on Tuesday, which included the beginning of a strategic review of its offshore and marine (O&M) segment.
Although he declined to disclose specific details, Keppel CEO Loh Chin Hua said “all options are available to the group,” including the merger of Keppel O&M with rival SMM, as well as the complete divestment of the segment.
Shares in SMM started the day at 14.4 Singapore cents, and continued to trend upward to an intraday high of 15.3 cents at 10am. The accountant then lost some profit to end the first half of the trading day at 14.9 cents.
The stock was also among the most actively traded in morning trading, with some 11.7 million shares changing hands in the first 13 minutes after the market opened.
After the midday break, investors remained active. Shares in SMM fell to 14.7 cents at 2:14 p.m., before recovering some losses to trade at 14.8 cents at 4:49 p.m. with some 198.2 million shares changing hands. SMM also emerged as the most traded stock of the day so far.
KGI Securities analyst Joel Ng told The Business Times that “more people have shown interest in SMM after the Keppel update, as investors became optimistic about a possible merger.”
Said Mr. Ng: “They need to adjust the size of their operations because with Keppel O&M and SMM having the two largest shipyards, there is definitely excess capacity and they have to consolidate their operations.”
He said the brokerage’s clients wanted to know if Keppel’s plans for the O&M segment review had involved Temasek, as well as the timing of the strategic reviews.
Ng said that while the merger talks between the duo “have been going on for a number of years,” investor optimism has increased thanks to more concrete announcements from Keppel.
“While it is still too early to predict anything about SMM, the recent announcement is definitely positive for Keppel’s share price, which should be re-rated if they decide to sell or divest their O&M segment.”
He added that Keppel is “taking things to the next step” with the update and “all the pieces are falling into place” for the conglomerate.
The group’s outlook had dimmed slightly after Temasek withdrew its pre-conditional partial offer of S $ 4 billion following the first S $ 697.6 million net loss for the second quarter ending in June.
Ng also said that the “key conclusion” of Keppel’s upgrade was the strategic review of its troubled O&M sector, and now expects the completion of the review to be announced by the end of the next three quarters.
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