Hot stock: Sembmarine shares rebound on Tuesday after previous day’s decline

SHARES of Sembcorp Marine (Sembmarine) rose on Tuesday (Feb 21) morning amid continued heavy trading volumes. This came after the stock concluded a volatile session and ended lower on Monday.  

As at 10.32 am, the offshore and marine giant had risen as much as 9.5 per cent or S$0.011 to S$0.127. It was the top-traded counter by both value and volume in mid-morning, with 264.6 million shares worth S$32.6 million transacted. 

Its share price later eased to trade 8.6 per cent or S$0.01 higher at S$0.126 as at 10.56 am. 

No married deals were recorded in early trade, ShareInvestor data indicated.

On Monday, Sembmarine had fallen as much as 12.2 per cent in morning trade, days after the results of its Feb 16 extraordinary general meeting were released. 

The counter ended 11.5 per cent or S$0.015 lower at S$0.116, after 723.1 million shares were transacted – well above its average trading volume of 103.5 million.

UOB Kay Hian maintained its “buy” rating and target price of S$0.156 for Sembmarine, as it remains bullish on the company’s prospects ahead of its merger with Keppel Corporation’s offshore and marine arm. 

In a report on Tuesday, analyst Adrian Loh said the “whipsawing” of both Sembmarine’s and Keppel’s share prices could present major opportunities for investors. 

He expects this volatility to continue until Feb 23, when Keppel will trade without the rights to a distribution of 19.1 Sembmarine shares for every Keppel share owned. 

Loh said the sell-off of Sembmarine’s shares on Tuesday likely came from shareholders of Keppel Corp, but believed this was “overdone”. In his view, the stock should be trading between a price-to-book ratio of 1.2 and 1.5 in an offshore marine upcycle, instead of a ratio of less than 1.

He continues to rate the offshore and marine sector at “overweight”, and said that following the merger, Sembmarine will become a larger and potentially more competitive entity with a strong renewables focus. 

The new global entity in the offshore renewables, new energy and cleaner offshore marine solutions segments should be able to “capture the strong order momentum that we have seen in offshore wind farms and new energy sources like hydrogen”, he added. 

Brian Freitas of Periscope Analytics similarly attributed Monday’s massive sell-off of Sembmarine shares to likely selling from Keppel shareholders who also own shares in Sembmarine – along with short-selling from market participants who anticipate selling from active investors in Keppel upon the expected settlement of new Sembmarine shares on Mar 1. In a Tuesday report published on Smartkarma, Freitas highlighted the potential buying activity of Sembmarine, following news of its inclusion in the MSCI Singapore Free Index, which measures the performance of the large and mid-capitalisation segments of the Singapore market. He estimates a net buying effect of 840 million of the group’s shares at the close of Mar 1. This comes as passive MSCI Singapore Free Index trackers will need to buy excess Sembmarine shares due to the migration from the small-cap to the standard index, while passive MSCI Small Cap trackers will need to sell their holdings in Sembmarine. In Freitas’ view, this expected net buying activity will “offset a fair bit of selling” from active investors that could come after the settlement of new Sembmarine shares. “While Sembmarine could drop in the short term due to selling from active investors, the passive buying should offset a large chunk of that,” he said.