Seatrium (formerly known as SembCorp Marine) *Official* (SGX: S51)

Shion

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A lifeline for Sembcorp Marine

A lifeline for Sembcorp Marine

Troubled Sembcorp Marine is getting a reprieve. Money Mind makes sense of the recapitalisation deal for the marine firm.

https://www.channelnewsasia.com/news/business/a-lifeline-for-sembcorp-marine-money-mind-12901252

SINGAPORE: Sembcorp Marine, the marine arm of conglomerate Sembcorp Industries, has been in the red for the past two years.

Debts have also been piling up, with net debt reaching the S$4 billion mark at the end of last year.

Then COVID-19 and falling oil prices hit.

Oil majors cut their budgets, and new orders began to slow or stopped altogether.

The deal will involve a five-for-one rights issue and a subsequent share distribution that will see Sembcorp Industries and SembMarine parting ways.

Sembcorp Industries will subscribe for up to S$1.5 billion of these rights shares.

Following the rights issue, it intends to distribute its entire stake in SembMarine to shareholders.



Ms Lim Siew Khee, head of Singapore research at CGS-CIMB Research, said this is a good thing for Sembcorp Industries, as it can reposition itself as an integrated energy player.

“They can now focus on urban development and utilities. So hopefully the stock can rerate, and it’s easier to value a company that is focused.”

The rights issue will raise about S$2.1 billion in gross proceeds.

The S$1.5 billion from Sembcorp Industries will go towards repaying a loan that the company extended to SembMarine in 2019.

The remaining S$600 million will either come from SembMarine’s existing shareholders, or from Temasek, who will sub-underwrite the rights issue and buy up any unsold shares.

With the funds, SembMarine’s CEO Wong Weng Sun said the firm will have the financial strength to ride through the prolonged industry downturn and prepare for recovery.

Analysts agree.

“It has lessened the stress on their balance sheet. With the fresh funding, they can then focus on chasing new contracts, without the funding worries,” said Ms Lim

But, in this current weak operating environment, it remains uncertain whether there will even be new contracts to bid for.

According to Paul Chew, head of research at Phillip Securities Research, order books for the yards had already been on the decline even before the pandemic and the collapse in oil prices.

“If you look at FY2020, the oil majors’ capex is expected to drop at least 20 per cent. So the outlook is not just murky. It is pretty dark.”

To remain viable, SembMarine will need to diversify from conventional rigs into other product offerings like renewables and gas solutions.

Mr Royston Tan of the New Academy of Finance said this is not just about being competitive, but also about diversifying the business model into more highly sought-after products, such as vessels for transporting liquefied natural gas.

In the renewables space, SembMarine has been in the offshore wind farm sector since 2015.

It already has offshore wind fabrication jobs in Taiwan and the United Kingdom on its books.

The recapitalisation exercise will leave Temasek with close to a 30 per cent stake in SembMarine at the minimum.

This is because Temasek is the largest shareholder of Sembcorp Industries, and it will get SembMarine shares when Sembcorp distributes its entire stake in the firm to shareholders.

Temasek’s stake could go up to 58 per cent if none of SembMarine’s existing shareholders take up the rights issue.

With all this in mind, what are the options for SembMarine shareholders?

According to Mr Chew, there will still need to be some form of capital raising.

“There will still be a need for SembMarine to raise liquidity, be it the rights, and this would be the best option rather than increase the debt levels even further, as these are already stretched.”

More than 50 per cent or a simple majority of minority shareholders must vote in favour of the proposed rights issue.

A simple majority will also be needed for the whitewash resolution, which waives their rights to receive a mandatory takeover offer from Temasek.

Under Singapore’s takeover code, any entity which has 30 per cent or more of the voting rights of a company will need to make a mandatory offer.

If the deal goes through, existing SembMarine shareholders will see their stakes being significantly diluted from 39 per cent to 6.5 per cent if they do not subscribe for the rights.

But, if they take up the rights offer, they will have to fork out more money just to maintain their stake.

So, it will be a dilemma for these investors.

Some investors may not even want to make a decision on the rights offer and market watchers caution that they could sell, ahead of SembMarine trading ex-rights.

This is because the share price will have to drop to account for the new rights shares.

The theoretical ex-rights price for SembMarine is 0.29 Singapore cents based on the last 5 day volume weighted average price or VWAP.

The developments around Sembcorp Marine have raised speculation once again of a merger of SembMarine with Keppel’s offshore & marine division.

Last year, Temasek made a S$4.1 billion offer to raise its stake in Keppel Corp to 51 per cent, and the transaction is set to be completed before October this year.

“It makes sense to merge. At the very least, you do not have two yards competing with each other. And secondly, if they don't merge, they also need to reduce their capacity quite drastically," said Mr Chew.

"If you just look at the oil majors’ capex, since 2013, it has halved to the current levels. But if you look at the capacity or the balance sheet of Sembcorp Marine, it has almost doubled from 2013, so you have a bit of a mismatch where the marine capacity has increased. But at the same time the oil majors’ capex has actually shrunk by half," he added.

Mr Tan said such a deal can only materialise if facilitated by the common shareholder of both parties, in this case, Temasek Holdings.

"A merger makes sense in the current context, as it will allow the enlarged entity to pool its resources together, while streamlining its operations to compete more effectively with Korean, Chinese and Japanese yards who themselves are all actively engaging in merger exercises over the past years, to stay relevant,” he said.
 

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Sembmarine and GE bag contract to build wind farm in North Sea

Sembmarine and GE bag contract to build wind farm in North Sea

https://www.businesstimes.com.sg/co...-bag-contract-to-build-wind-farm-in-north-sea

SEMBCORP Marine and its consortium partner have been picked by German utilities company RWE as the preferred suppliers of the electrical transmission system for one of the world's biggest offshore wind farms located at sea north-east of the United Kingdom.

Sembcorp Marine, together with GE Renewable Energy's Grid Solutions, will start early design works for the Sofia Offshore Wind Farm this month. The full contract is subject to a final investment decision, which is due in the first quarter of 2021.

If approved, it is expected that Sembcorp Marine will build and install the wind farm’s offshore converter platform.

As the consortium leader, GE’s Grid Solutions will be responsible for the engineering, procurement, construction and installation of the two HVDC converter stations.

The 593 sq km wind farm, located on Dogger Bank in the North Sea, represents about £3 billion (S$5.3 billion) in investment in the UK’s electricity infrastructure. It will provide clean electricity to almost 1.2 million homes in the UK, the marine arm of Sembcorp Industries said.

Sembmarine’s president and chief executive Wong Weng Sun said: “The Sofia Offshore Wind Farm will strengthen Sembcorp Marine’s strategic diversification into greener solutions, which already accounted for over S$530 million of our new orders in 2019.

“In supporting the global economy’s transition towards a cleaner energy mix, we aim to have 30 per cent of our total revenue from sustainable products and solutions by 2030.”

Construction of the wind farm is planned to begin onshore early next year, with offshore construction expected to get underway in 2023.

Sembcorp Marine is now fabricating jacket foundations for the Formosa 2 Offshore Wind Farm in Taiwan, as well as substation topsides for the Hornsea 2 Offshore Wind Farm, also located in the UK North Sea.

Shares of Sembmarine closed up 0.5 Singapore cents, or 1.11 per cent to S$0.455.
 

htngwilliam

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Sembmarine and GE bag contract to build wind farm in North Sea

https://www.businesstimes.com.sg/co...-bag-contract-to-build-wind-farm-in-north-sea

SEMBCORP Marine and its consortium partner have been picked by German utilities company RWE as the preferred suppliers of the electrical transmission system for one of the world's biggest offshore wind farms located at sea north-east of the United Kingdom.

Sembcorp Marine, together with GE Renewable Energy's Grid Solutions, will start early design works for the Sofia Offshore Wind Farm this month. The full contract is subject to a final investment decision, which is due in the first quarter of 2021.

If approved, it is expected that Sembcorp Marine will build and install the wind farm’s offshore converter platform.

As the consortium leader, GE’s Grid Solutions will be responsible for the engineering, procurement, construction and installation of the two HVDC converter stations.

The 593 sq km wind farm, located on Dogger Bank in the North Sea, represents about £3 billion (S$5.3 billion) in investment in the UK’s electricity infrastructure. It will provide clean electricity to almost 1.2 million homes in the UK, the marine arm of Sembcorp Industries said.

Sembmarine’s president and chief executive Wong Weng Sun said: “The Sofia Offshore Wind Farm will strengthen Sembcorp Marine’s strategic diversification into greener solutions, which already accounted for over S$530 million of our new orders in 2019.

“In supporting the global economy’s transition towards a cleaner energy mix, we aim to have 30 per cent of our total revenue from sustainable products and solutions by 2030.”

Construction of the wind farm is planned to begin onshore early next year, with offshore construction expected to get underway in 2023.

Sembcorp Marine is now fabricating jacket foundations for the Formosa 2 Offshore Wind Farm in Taiwan, as well as substation topsides for the Hornsea 2 Offshore Wind Farm, also located in the UK North Sea.

Shares of Sembmarine closed up 0.5 Singapore cents, or 1.11 per cent to S$0.455.

Flogging a dead horse. 😂
 

Shion

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Pay cuts at Sembmarine as yard shutdowns bring H1 net loss to S$192 million

Pay cuts at Sembmarine as yard shutdowns bring H1 net loss to S$192 million

https://www.businesstimes.com.sg/co...d-shutdowns-bring-h1-net-loss-to-s192-million

SEMBCORP Marine (Sembmarine) has posted a net loss of S$192.1 million in the half-year ended June 30, due to the shutdown of production activities at all its Singapore yards since April as a result of the Covid-19 pandemic.

By comparison, the group made a net loss of S$6.8 million in the same period the year before. Revenue in the first half was S$906 million, down 41 per cent from the same period a year earlier.

All segments posted losses in the six-month period, with the exception of the repairs-and-upgrades business, which reported higher profits on better product mix of higher-margin upgrade projects executed in the first quarter of 2020.

Sembmarine president and chief executive Wong Weng Sun told an earnings call on Wednesday: "We had positioned ourselves for recovery in 2020, but we were unexpectedly hit by Covid-19 and the collapse of oil prices.

"Given the delays in executing our existing projects, and with new orders likely to remain depressed in 2020, the group now foresees that recovery will be pushed out to 2021 and beyond."

The net order book was S$1.91 billion as at end-June, down from S$2.4 billion as at end-2019. "While we have yet to announce significant new orders this year, we have resumed discussions on several project opportunities," Mr Wong said.

With the relaxation of Covid-19 measures in Singapore in June, production activities gradually resumed from early this month, but Sembmarine continues to right-size its workforce.

Mr Wong has volunteered to take a 50 per cent pay cut. Senior management will take a 15 per cent salary reduction; middle management will take 10 per cent less. All other employees in Singapore and overseas will take a 5 per cent pay cut, except for those earning under S$1,800 a month. Sembmarine's board is also continuing with a 10 per cent reduction in director’s fees this year, similar to FY2019.

All non-essential capital expenditures have been deferred. Capex in the first half of 2020 was S$58 million, less than a third of the amount incurred in the first half of 2019. Mr Wong said: "Going forward, we expect capex to remain low, as only maintenance capex will be incurred to ensure the safety and operability of our yard facilities."

Sembmarine remained in a net current liabilities position of S$259 million as at June 30, due mainly to term loans maturing over the next 12 months. The group said it is engaging with its lenders to refinance these loans with longer term maturities.

Mr Wong said: "In June 2020, we completed the refinancing of three term loans due that month, with longer term maturities. The group expects to have adequate existing loan facilities to repay or refinance current borrowings as they fall due."

With no operating activities for almost three months in the first half of 2020, cash flow from operations was a negative S$122 million, compared with a positive S$273 million in the corresponding period the year before.

Net gearing was 1.35 times as at end-June, compared to 1.14 times at end-2019.

On June 8, Sembmarine announced a proposed S$2.1 billion renounceable underwritten rights issue, followed by a proposed demerger ofSembmarine from its parent, Sembcorp Industries (SCI), via a distribution in specie of Sembmarine shares owned by SCI to SCI’s shareholders.

Mr Wong urged shareholders to support the rights issue when it is put to a vote in August: "The proposed rights issue, when completed, will strengthen our balance sheet by converting our S$1.5 billion subordinated loan from SCI into equity on our balance sheet.

"This will lower our net gearing as at end-2019 from 1.82 times to 0.45 times on a pro forma basis, and significantly reduce our interest expense. We will also raise approximately S$0.6 billion additional cash to fund our working capital needs and other general corporate purposes, enabling us to compete for high-value new orders and overall ensure our long-term viability."

First-half loss per share was 9.19 Singapore cents, widening from a loss per share of 0.33 Singapore cent in the first half of 2019.

Net asset value per share was 94.77 Singapore cents as at June 30, 2020, down from 103.96 Singapore cents as at Dec 31, 2019.

Sembmarine shares rose one Singapore cent or 2.25 per cent to S$0.455 on Wednesday before the results were announced after market close.
 

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eDM_Sembcorp_Dialogue_Session_Jul2020a.jpg


eDM_Sembcorp_Dialogue_Session_Jul2020b.jpg
 

ashethen

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if there is a structural shift in business cannot compare leh, last time ppl think SPH is one of the best because its monopoly, no one expect it to be impacted by digitization, was trading around $4, same as Keppel which used to be $10+ and starhub at $4

in future when autonomous vehicles come into market CDG and Grab will be the next to be impacted.

Why CDG and grab will face negative impact when autonomous vehicles come? Autonomous vehicles cannot be taxis?

Posted from PCWX using SM-N960F
 

arctician

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Why CDG and grab will face negative impact when autonomous vehicles come? Autonomous vehicles cannot be taxis?

Posted from PCWX using SM-N960F

Uber, grab all investing in AI and autonomous vehicle research because it can make ride hailing highly profitable, just imagine next time your car can be hailed 7/24 on platform so your capacity utilization is 100%, and you get the 100% fare earnings compared to now where driver take 80% of fare and only 20% is routed to grab

Currently large chunk of cdg revenue is from taxi rental where driver pay $130 per day, if grab can launch autonomous ride hailing they can easily drop price and yet see increase in margin, if cdg drivers are displaced naturally no one can afford to rent their fleet. SG likes to embrace disruption so they will be allowed for hailing eventually.

i believe electric vehicles are way to go in future, too bad SG no telsa, those telsa S model in japan really cool in aesthetics and features
 

ashethen

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Uber, grab all investing in AI and autonomous vehicle research because it can make ride hailing highly profitable, just imagine next time your car can be hailed 7/24 on platform so your capacity utilization is 100%, and you get the 100% fare earnings compared to now where driver take 80% of fare and only 20% is routed to grab

Currently large chunk of cdg revenue is from taxi rental where driver pay $130 per day, if grab can launch autonomous ride hailing they can easily drop price and yet see increase in margin, if cdg drivers are displaced naturally no one can afford to rent their fleet. SG likes to embrace disruption so they will be allowed for hailing eventually.

i believe electric vehicles are way to go in future, too bad SG no telsa, those telsa S model in japan really cool in aesthetics and features

wouldn't CDG be pivoting, from renting out their fleet to drivers, to be the one operating the entire fleet of autonomous taxis instead?
 

arctician

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wouldn't CDG be pivoting, from renting out their fleet to drivers, to be the one operating the entire fleet of autonomous taxis instead?

they dont have the capabilities, if i remember only selected few vendors investing in autonomous research, CDG is going to bear the full impact of disruption when it materialize
 

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Semb marine keep hitting new low. Better run fast. Don’t be the last one to leave the sinking boat and go down with titanic. Lol
 

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https://www.businesstimes.com.sg/companies-markets/sembcorp-sembmarine-investors-express-concerns-about-demerger

Proxy adviser Institutional Shareholder Services (ISS) on Wednesday said that both Sembcorp and Sembmarine shareholders should vote in favour of the resolutions.

ISS said the demerger should enhance value for Sembcorp shareholders by providing a clearer investment proposition and eliminating the risk of exposure to the troubled offshore and marine industry.

Furthermore, Sembcorp shareholders will not have to pay additional fees for the proposed distribution and will be given direct shareholdings in Sembmarine. ISS noted that these shareholders will also be given the flexibility to decide on their shareholdings in both companies following the demerger.

For Sembmarine, ISS warned of a potential dilution of the ownership of existing shareholders as a result of the rights issue. But it said this would only happen should existing shareholders forgo their subscription rights.
 

skpuppy

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Semb corp shareholders get semb marine shares (cui). Semb marine shareholders need to pump money in to prevent dilution. Scary sia.

Imagine you buy at more than $3.80 per share. Practically 90% valuation gone. Praying hard the shares don’t drop further after rights issue. Else die
 

politicalsg

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Yeah that's ****ed up for semb marine shareholders. So many new shares being generated just for sembcorp people for free. The ratio is around 4 semb marine shares per 1 sembcorp share you own, and factoring in that the 4 are given for free... not going to do well for semb marine share price.
 

arctician

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i think most sembmarine shareholder would have sent in their form already, sounds like election 50/50.

Really curious how SCM shareholder will vote

in the SIAS session got a qn what may happen if resolution not passed..their finance said SCM will be in severe financial stress if this happens because need to pay 1.5B debt and also raise working capital. Privatization also dont help to address their working capital needs..i think end of day though SCM shareholders are upset about the deal but theres really not much option
 

skpuppy

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Yeah that's ****ed up for semb marine shareholders. So many new shares being generated just for sembcorp people for free. The ratio is around 4 semb marine shares per 1 sembcorp share you own, and factoring in that the 4 are given for free... not going to do well for semb marine share price.

The Keppel merger may not materialise
 

klanddt

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It is not free. SCI investors get the SCM shares because SCM owes the parent company **** loads of money that's why.

Yeah that's ****ed up for semb marine shareholders. So many new shares being generated just for sembcorp people for free. The ratio is around 4 semb marine shares per 1 sembcorp share you own, and factoring in that the 4 are given for free... not going to do well for semb marine share price.
 

reddevil0728

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The Keppel merger may not materialise
erm. based on their most recent report, Temasek has around 49% interest in SCI. and SCI has about 60% interest in SMM.

so unless i am missing something, in the case of SCI unless 51% of the other shareholders say no (which I really doubt they are all so together in arms), it will definitely go through.

for SMM, since SCI has interest of almost 61%, it is also given?

unless the interested parties say they will abstain from the vote? or if the voting threshold is set above a simple majority (i didn't read the proposals so maybe they have diff voting threshold for such corporate actions)
 

surfman

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erm. based on their most recent report, Temasek has around 49% interest in SCI. and SCI has about 60% interest in SMM.

so unless i am missing something, in the case of SCI unless 51% of the other shareholders say no (which I really doubt they are all so together in arms), it will definitely go through.

for SMM, since SCI has interest of almost 61%, it is also given?

unless the interested parties say they will abstain from the vote? or if the voting threshold is set above a simple majority (i didn't read the proposals so maybe they have diff voting threshold for such corporate actions)

There's whitewash resolution which temasek will not vote and only minority shareholder can vote. So if smm minority shareholders vote against whitewash resolution, the deal will not go through
 
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