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Hot stocks: Sembcorp, SembMarine in active trading on privatisation rumours

2011632238780.5 (37166579) - 12_01_2016 - new Sembcorp Marine stock photos.jpg
Sembcorp Marine (SembMarine) and its parent company Sembcorp Industries were in active trading on Wednesday morning following rumours of a full takeover by the parent firm or just an injection of funds into Sembcorp Marine.

SEMBCORP Marine (SembMarine) and its parent company Sembcorp Industries were in active trading on Wednesday morning following rumours of a full takeover by the parent firm or just an injection of funds into Sembcorp Marine.

By the market's close on Wednesday, Sembcorp Marine's counter was up half a Singapore cent - or 0.3 per cent - to S$1.485. Sembcorp Industries closed 24 cents - or 9.4 per cent - lower at S$2.30. A total of 17.6 million shares and 14.9 million shares changed hands, respectively. 

On Tuesday, a Reuters article cited sources as saying that Singapore's Sembcorp Industries Ltd may inject funds into Sembcorp Marine Ltd or buy full control of the drilling rig builder to replenish finances strained by a collapse in oil prices.

Both Sembcorp Marine and Keppel have been trading at their lowest valuations in at least 13 years, Thomson Reuters data showed.

Sembcorp Industries, of which almost half is owned by Temasek Holdings, currently owns 61 per cent of Sembcorp Marine. The latter services the offshore and marine industry that has been plagued by oversupply. And with the plunge in oil prices, Singapore's rig building industry faces a dearth of new orders, while some orders are at risk of cancellation.

In general, when a firm acquires another entity, there is a predictable short-term effect on the stock prices of both companies. The target company's stock will rise on expectation that the acquiring company will pay a premium, while the acquiring company's stock will fall given the uncertainties relating to any acquisition.