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I am a SCI holder, but not SCM holder currently. According to my personal foresight, I will end up being a SCM holder but not SCI holder. Here is how:
If we get past the EGM with all 3 resolutions passed, I will Sell all my SCI shares before ex entitlement record date. And when the SCM Rights are listed, I will Buy up some SCM Rights via market transactions to exercise at 20 cents each. Thereafter, will just wait & see what is the plan for majority-Temasek-owned SCM.
Of course there will never be a privatisation of SCM in the near future simply because Temasek has its intention not to make an offer for SCM known in the whitewashed resolution. Will see how the situation pans out.
If we get past the EGM with all 3 resolutions passed, I will Sell all my SCI shares before ex entitlement record date. And when the SCM Rights are listed, I will Buy up some SCM Rights via market transactions to exercise at 20 cents each. Thereafter, will just wait & see what is the plan for majority-Temasek-owned SCM.
Of course there will never be a privatisation of SCM in the near future simply because Temasek has its intention not to make an offer for SCM known in the whitewashed resolution. Will see how the situation pans out.
tritonyeah666 ( Date: 11-Jun-2020 13:50) Posted:
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I don't think you are comparing apple to apple.
Data is to uncover insight and support business decision. It is not use to power your cars or use to produce plastic and electricity.
The closing next to oil is renewable energy which sembcorp have a business in it. Again, the world won't move fast to switch sources of fuel simply becoz our current system are build to work with oil as the main source of energy.
So don't mix data and oil. They are totally different.
uiop1223 ( Date: 11-Jun-2020 16:08) Posted:
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Errr... What do you still need in order to fuel your alternative energy?
huatster ( Date: 11-Jun-2020 16:24) Posted:
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Alternative energy will be a boom in the next 10 years.
Djsoul80 ( Date: 11-Jun-2020 16:22) Posted:
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Hmm... I don't have much knowledge of what you've just mentioned. But for what I know, at the mean time or at least for another 10 years or so, oil is definitely still a demanding commodity.
uiop1223 ( Date: 11-Jun-2020 16:08) Posted:
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U want to post on Facebook ask ? I think can be done . Once u post let us know
uiop1223 ( Date: 11-Jun-2020 16:08) Posted:
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Hmm.. but why restructure a outdated sector? Data is the new oil. We shld take the lead in doing AI , DA and so on. Like china... spend so much taxpayers money (Temasek source of fund) on oil rigs where shale oil has already capped any future gains. Oil is no longer black gold
Merge to form a stronger company under Keppel Corp. I guess it will be a speedy transaction within this year. During crisis, we see alot of restructuring of companies. This is how most companies survived crisis by merging and restructuring.
wencong76 ( Date: 11-Jun-2020 15:03) Posted:
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if confirm.... the price will shot up... its a risk... it may or it might not.... for me... i work inside the yard. So my guess is it will merge
1c2e3s ( Date: 11-Jun-2020 13:42) Posted:
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Hey yo... Needless to your action point lah.. If any investors buying up sembcorp marine, the motive is to subscribe for the guaranteed rights at cheapo.. Then wait for merger with kepcorp. It's for long term investors to mingle with.. Short term investors or do not know about this corporate action, should stay away from this forum just in case their itch backsides want to play contra and got burnt.
tritonyeah666 ( Date: 11-Jun-2020 13:50) Posted:
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Sembmar will become 0.20 cents that is a fact post EGM approval.
Action Pts: Either buy the SMM rights to average down, or jump over to Semb Industries to average down.
Action Pts: Either buy the SMM rights to average down, or jump over to Semb Industries to average down.
but nothing is confirm?
wencong76 ( Date: 11-Jun-2020 13:26) Posted:
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Total agree with you. you see the action by TH.. its a plan... Keppel and SMM is also a big contributor to SG enconmy.
Djsoul80 ( Date: 11-Jun-2020 12:56) Posted:
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why u r confident about keppel merger? they jus kena a lawsuit from brazil
Djsoul80 ( Date: 11-Jun-2020 12:56) Posted:
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I'm a new positions with SMM. So I'm accumulating my positions to get my guaranteed rights to subscribed at cheap. Waiting for kepcorp merger. Sembcorp marine to bye bye and ex sembcorp marine be the potential kepcorp shareholders.
tritonyeah666 ( Date: 11-Jun-2020 12:42) Posted:
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There used to a user by the name of Francisgoh or something right? He had huge number of shares in SMM, hope he didnt get burnt and sold in time.
I didn't missed the boat though. I've enough SCI bought st price $1.41. Am now accumulating SMM as the merger with Keppel corp going to be good as well. So getting more to bmget guaranteed rights entitlement to subscribed. Should be over subscribed for the rights issue.
danger ( Date: 11-Jun-2020 09:48) Posted:
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Octavia missed the sci boat big time
Keep repeating same thing
Keep repeating same thing
Loaded more positions at 585.
STRATEGY &ndash SINGAPORE A Sea Change
SCI and SMM announced a significant two-stage transaction yesterday with the latter raising S$2.1b via a 5-for-1 rights issue, followed by a de-merger of the two companies. After repaying a S$1.5b loan to SCI, SMM will end up with S$600m cash which it needs to bridge current difficult industry conditions.
In the short term, both stocks may underperform, however we are hopeful that business conditions will improve for both in the next 6-12 months.
WHAT&rsquo S NEW
&bull A major transaction.
Sembcorp Marine (SMM) and Sembcorp Industries (SCI) announced they will undertake a two-stage transaction involving:
a) SMM undertaking a rights issue to raise S$2.1b and
2) SMM to de-merge from SCI.
&bull First stage.
In the first stage, SMM will undertake a 5-for-1 rights issue at S$0.20 per rights share, raising gross proceeds of about S$2.1b. SCI will undertake to subscribe for up to S$1.5b of the rights to set off against the S$1.5b principal amount outstanding under its Subordinated Credit Facility with SMM. Temasek has agreed to subscribe for up to S$0.6b of the rights.
&bull Second stage..
In the second stage and post the completion of the rights issue, SCI will distribute in specie and on a pro rata basis its stake of SMM to its shareholders. For every 100 SCI shares, the shareholder will receive 427-491 SMM shares with no payment required. As a result, Temasek will end up being a direct shareholder of SMM instead of an indirect shareholder via SCI.
&bull Use of S$2.1b rights proceeds.
SMM will repay the S$1.5b outstanding principal due to SCI (72% of funds raised) via a set-off agreement. The remaining S$0.6b (28% of funds raised) will be used for working capital and general corporate purposes, including debt servicing. SCI&rsquo s remaining S$0.5b undrawn credit facility to SMM will be terminated.
&bull Timetable.
The expected Extraordinary General Meeting (EGM) to vote on the necessary resolutions for this transaction is expected in late-August to early-Sep 20 with a view towards deal completion in 4Q20. Thus, the dates for lodgement of SMM&rsquo s offer information statement, trading of SMM&rsquo s rights and SCI&rsquo s record date for the distribution of its SMM shares are not known at present.
&bull Approvals required.
There are three shareholders&rsquo approvals required at the EGM, all with simple majority (> 50%) present and voting:
1) approval for SCI to distribute its SMM shares in specie (Temasek will abstain),
2) approval for SMM to undertake the rights issue (SCI will be voting in favour of this resolution), and
3) approval from SMM shareholders for a Whitewash Resolution to waive their rights to receive a mandatory takeover offer from Temasek (SCI will abstain on this resolution) as Temasek may end up as a > 30% stake in SMM.
Note that all three of these resolutions are inter-conditional, ie all of them will need to be passed for the transaction to proceed.
ACTION &bull
Rationale behind the de-merger.
On both the SCI and SMM&rsquo s analyst calls, the companies emphasised that while there were synergies before (and stated by SCI as recently as Jun 19 when it extended the S$2b loan to SMM), they did not currently see meaningful synergies between them, given the new paradigm of the COVID-19 pandemic and the downturn in the oil & gas cycle.
SCI in particular noted rapidly altered demand patterns in Asia from the effects of rapid industrialisation, electrification and urbanisation and thus want to change tack to focus on these factors without the &lsquo constraints&rsquo of SMM.
On the SMM side, management said the de-merger would create a more focused company that would be able to pursue its own strategy with regard to clean-energy solutions.
&bull More plausible explanation for SCI to de-merge, in our view.
One of the key benefits of the demerger for SCI is that its more focused strategy on energy and urban developments should enable it to trade at valuation multiples that are comparable to the utilities sector rather than being shouldered with the offshore marine segment.
&bull A lifeline for SMM.
The short-term prospects for SMM to return quickly to profitability are remote, given current industry dynamics coupled with the COVID-19 workplace restrictions, in our view. With a reduced orderbook compared to 3-5 years ago, its financials have suffered, thereby putting pressure on the company&rsquo s liquidity and capital requirements.
SMM has proactively attempted to respond by rightsizing the company and deferring capex, but even then, it needed the rights issue to maintain sufficient liquidity to ride out the current downturn.
RISKS
&bull COVID-19.
The obvious risk factor is that of the COVID-19 pandemic weighing negatively on demand for utilities and the offshore marine industry&rsquo s products for a longer-than-expected period.
&bull Oil prices.
While Brent oil prices have rebounded nearly 120% from the lows in late-April, they are nevertheless still down 36% ytd. In our view, oil prices need to sustain at US$45/bbl or more over the medium term for the market to gain confidence, and for new orders to start trickling in.
RECOMMENDATION
&bull SCI.
Maintain HOLD with a lower target price of S$1.20 which strips out the SMM business from SCI on a pro forma basis. We use target P/B multiple of 0.8x for SCI which is in-line with its ex-Marine P/B multiple over the past five years. Relative to its regional utilities peers which trade at around 1x P/B, we believe a discount for SCI is warranted as the company&rsquo s various business units may face weakness for at least the next six months due to our expectation that economic weakness will impact all of the company&rsquo s business units.
Entry price is S$1.10.
&bull SMM.
Maintain HOLD and lower our target price to S$0.25 (S$0.81 previously) to take into account the potential 10.46b new shares that will be issued. We kept our target P/B multiple at 0.9x which we believe takes into account the expected lack of new orders in the near to medium term.
Concurrent with the announcement of the transaction, SMM issued a business update which is as bearish as its 1Q20 update released on 13 May 20. Securing new orders remains extremely difficult while its repairs & upgrades business has been affected by disruptions in global shipping and cruises. As a result, we believe that 1H20 results, to be released at the end of July, will be extremely weak.
Entry price is S$0.23.
SCI and SMM announced a significant two-stage transaction yesterday with the latter raising S$2.1b via a 5-for-1 rights issue, followed by a de-merger of the two companies. After repaying a S$1.5b loan to SCI, SMM will end up with S$600m cash which it needs to bridge current difficult industry conditions.
In the short term, both stocks may underperform, however we are hopeful that business conditions will improve for both in the next 6-12 months.
WHAT&rsquo S NEW
&bull A major transaction.
Sembcorp Marine (SMM) and Sembcorp Industries (SCI) announced they will undertake a two-stage transaction involving:
a) SMM undertaking a rights issue to raise S$2.1b and
2) SMM to de-merge from SCI.
&bull First stage.
In the first stage, SMM will undertake a 5-for-1 rights issue at S$0.20 per rights share, raising gross proceeds of about S$2.1b. SCI will undertake to subscribe for up to S$1.5b of the rights to set off against the S$1.5b principal amount outstanding under its Subordinated Credit Facility with SMM. Temasek has agreed to subscribe for up to S$0.6b of the rights.
&bull Second stage..
In the second stage and post the completion of the rights issue, SCI will distribute in specie and on a pro rata basis its stake of SMM to its shareholders. For every 100 SCI shares, the shareholder will receive 427-491 SMM shares with no payment required. As a result, Temasek will end up being a direct shareholder of SMM instead of an indirect shareholder via SCI.
&bull Use of S$2.1b rights proceeds.
SMM will repay the S$1.5b outstanding principal due to SCI (72% of funds raised) via a set-off agreement. The remaining S$0.6b (28% of funds raised) will be used for working capital and general corporate purposes, including debt servicing. SCI&rsquo s remaining S$0.5b undrawn credit facility to SMM will be terminated.
&bull Timetable.
The expected Extraordinary General Meeting (EGM) to vote on the necessary resolutions for this transaction is expected in late-August to early-Sep 20 with a view towards deal completion in 4Q20. Thus, the dates for lodgement of SMM&rsquo s offer information statement, trading of SMM&rsquo s rights and SCI&rsquo s record date for the distribution of its SMM shares are not known at present.
&bull Approvals required.
There are three shareholders&rsquo approvals required at the EGM, all with simple majority (> 50%) present and voting:
1) approval for SCI to distribute its SMM shares in specie (Temasek will abstain),
2) approval for SMM to undertake the rights issue (SCI will be voting in favour of this resolution), and
3) approval from SMM shareholders for a Whitewash Resolution to waive their rights to receive a mandatory takeover offer from Temasek (SCI will abstain on this resolution) as Temasek may end up as a > 30% stake in SMM.
Note that all three of these resolutions are inter-conditional, ie all of them will need to be passed for the transaction to proceed.
ACTION &bull
Rationale behind the de-merger.
On both the SCI and SMM&rsquo s analyst calls, the companies emphasised that while there were synergies before (and stated by SCI as recently as Jun 19 when it extended the S$2b loan to SMM), they did not currently see meaningful synergies between them, given the new paradigm of the COVID-19 pandemic and the downturn in the oil & gas cycle.
SCI in particular noted rapidly altered demand patterns in Asia from the effects of rapid industrialisation, electrification and urbanisation and thus want to change tack to focus on these factors without the &lsquo constraints&rsquo of SMM.
On the SMM side, management said the de-merger would create a more focused company that would be able to pursue its own strategy with regard to clean-energy solutions.
&bull More plausible explanation for SCI to de-merge, in our view.
One of the key benefits of the demerger for SCI is that its more focused strategy on energy and urban developments should enable it to trade at valuation multiples that are comparable to the utilities sector rather than being shouldered with the offshore marine segment.
&bull A lifeline for SMM.
The short-term prospects for SMM to return quickly to profitability are remote, given current industry dynamics coupled with the COVID-19 workplace restrictions, in our view. With a reduced orderbook compared to 3-5 years ago, its financials have suffered, thereby putting pressure on the company&rsquo s liquidity and capital requirements.
SMM has proactively attempted to respond by rightsizing the company and deferring capex, but even then, it needed the rights issue to maintain sufficient liquidity to ride out the current downturn.
RISKS
&bull COVID-19.
The obvious risk factor is that of the COVID-19 pandemic weighing negatively on demand for utilities and the offshore marine industry&rsquo s products for a longer-than-expected period.
&bull Oil prices.
While Brent oil prices have rebounded nearly 120% from the lows in late-April, they are nevertheless still down 36% ytd. In our view, oil prices need to sustain at US$45/bbl or more over the medium term for the market to gain confidence, and for new orders to start trickling in.
RECOMMENDATION
&bull SCI.
Maintain HOLD with a lower target price of S$1.20 which strips out the SMM business from SCI on a pro forma basis. We use target P/B multiple of 0.8x for SCI which is in-line with its ex-Marine P/B multiple over the past five years. Relative to its regional utilities peers which trade at around 1x P/B, we believe a discount for SCI is warranted as the company&rsquo s various business units may face weakness for at least the next six months due to our expectation that economic weakness will impact all of the company&rsquo s business units.
Entry price is S$1.10.
&bull SMM.
Maintain HOLD and lower our target price to S$0.25 (S$0.81 previously) to take into account the potential 10.46b new shares that will be issued. We kept our target P/B multiple at 0.9x which we believe takes into account the expected lack of new orders in the near to medium term.
Concurrent with the announcement of the transaction, SMM issued a business update which is as bearish as its 1Q20 update released on 13 May 20. Securing new orders remains extremely difficult while its repairs & upgrades business has been affected by disruptions in global shipping and cruises. As a result, we believe that 1H20 results, to be released at the end of July, will be extremely weak.
Entry price is S$0.23.