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Hot stock: Sembmarine shares rise 2.8% as investors gain optimism on potential merger

Sembmarine - SEMBCORP MARINE.jpg
"More people have been showing interest in SMM following Keppel's update, as investors grew optimistic about a potential merger," said KGI analyst Joel Ng.

SEMBCORP Marine (SMM) shares rose 2.8 per cent on Wednesday following Keppel Corporation's Vision 2030 update on Tuesday which included the commencement of a strategic review of its offshore and marine (O&M) segment.

While declining to disclose specific details, Keppel's chief executive officer Loh Chin Hua said that "all options are available to the group" - including the merger of Keppel O&M with rival SMM, as well as a complete divestment of the segment.

SMM shares began the day at 14.4 Singapore cents, and continued on an uptrend to an intra-day high of 15.3 cents at 10am. The counter then lost some gains to end the first half of the trading day at 14.9 cents.

The stock was also among the most actively traded in early morning trading, with some 11.7 million shares changing hands in the first 13 minutes after market open.

Post midday break, investors continued to get active. SMM shares dropped to 14.7 cents as at 2.14pm, before regaining some losses to trade at 14.8 cents as at 4.09pm with some 198.2 million shares having changed hands. SMM also emerged the most actively traded stock for the day thus far.

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KGI Securities analyst Joel Ng told The Business Times that "more people have been showing interest in SMM following Keppel's update, as investors grew optimistic about a potential merger".

Said Mr Ng: "They need to rightsize their operations because with Keppel O&M and SMM having the two biggest yards, there's definitely an overcapacity 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's review had involved Temasek, as well as the timeline of the strategic reviews.

Mr Ng said that while merger talks between the duo "have been going on for several years now", investor optimism has risen on the back of more concrete announcements by Keppel.

"While it is still too early to predict anything about SMM, the recent announcement is definitely a positive for Keppel's share price which should see a rerating 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 in place" for the conglomerate.

The group's prospects had been dimmed slightly after Temasek pulled its pre-conditional S$4 billion partial offer following the former's S$697.6 million net loss for the second quarter ended June.

Mr Ng also said the "key takeaway" from Keppel's update was the strategic review of its troubled O&M sector, and now expects the conclusion of the review to be announced by the end of the next three quarters.

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