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Hot stocks: Sembcorp Industries, Sembcorp Marine gain ground

SHARES in Sembcorp Industries (SCI) rose on Friday morning amid speculation about a spin-off in India, while trading in its offshore and marine arm, Sembcorp Marine, picked up following an upgrade by Nomura.

SembMarine shot up 17 Singapore cents to S$2.27, while SCI climbed 16 cents to hit S$3.41. By around 12.15pm, some 10.05 million shares in SCI worth S$33.55 million had changed hands, while 25.66 million SembMarine shares worth S$56.8 million were traded.

This prompted SCI to issue a clarification on media reports relating to the rumoured IPO (initial public offer) plans of a Sembcorp unit in India. It said: "We would like to clarify that we continually evaluate various commercial and financial options for our businesses, including our India business. At present, there are no developments warranting an announcement but in the event of any, the company would update the market as necessary."

Meanwhile, in a report issued on Friday, Nomura analysts Abhishek Bigam and Bineet Banka upgraded SembMarine to a "buy" with a target price of S$2.70. Citing SembMarine as a turnaround story, they pointed to positives such as improving gearing, a pick-up in orders and a likely rise in free cash flow with its capex cycle coming to an end.

"2017 witnessed a modest pick-up in offshore and marine orders. In fiscal 2018, should Brent oil prices sustain above US$60 per barrel, we expect new orders to rise further," wrote the Nomura analysts.

Oil prices have been on an upward trend, with Brent oil climbing from US$44 per barrel in June last year and peaking at US$70 in mid-January.

Another analyst that BT spoke to suggested that there could also be some speculation on the potential privatisation or divestment of SembMarine by SCI. SCI is undergoing a strategic review of its businesses.

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