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SembMarine shares jump 7.9% on heavy volume, sparking SGX query

SHARES of Sembcorp Marine (SembMarine) surged amid active trading on Wednesday afternoon, drawing a query from the bourse operator, according to filings by the mainboard-listed offshore and marine (O&M) firm.

The counter had hovered within the S$1.41-1.42 range for most of Wednesday, before climbing to S$1.495 shortly after 4pm with almost 6 million shares traded.

It reached an intra-day high of S$1.53 minutes before the market closed, and ended trading at S$1.51, up 7.86 per cent or 11 cents.

A total of 21.3 million shares worth S$31.76 million changed hands during the day, making it one of the most heavily traded securities on the Singapore bourse.

The Singapore Exchange (SGX) flagged “unusual price movements” in SembMarine’s shares in a letter at around 4.37pm on Wednesday, asking whether the company knew of any possible explanation for the trading.

In a filing on Thursday morning before the market opened, SembMarine said it was unaware of any information not previously announced concerning the company which might explain the trading activity.

SembMarine noted on Thursday that it “negotiates contracts with its customers” in its ordinary course of business, and “there is no certainty that any transaction will materialise”.

The company said it will issue announcements if and when there are material contracts secured.

As for other possible explanations for the trading, SembMarine said that there were “various reports in the media and rating updates by stock broking firms recently” that might have an impact on its share price, although it did not give further details.

Its latest bourse filing before Wednesday was made on July 8, when it released a statement on the ongoing bribery investigations in Brazil, saying it had lodged a suspicious transaction report with the Commercial Affairs Department of the Singapore Police Force.

Before that, the company revealed that its yard in the south-eastern state of Brazil was raided and the facility’s former president was involved in a corruption probe.

Present investigations involve Martin Cheah Kok Choon, the former president of SembMarine's Brazil unit, Estaleiro Jurong Aracruz (EJA), during the time when he was in the employment of the group.

On July 3, DBS Equity Research made a “buy” call on SembMarine with a S$2.40 target price on July 3, after the O&M company gave the update on the Brazil yard raid. DBS analyst Ho Pei Hwa said that a worst case scenario for SembMarine could amount to a penalty of S$200 million to S$400 million, which translates to about 8-17 per cent of its book value and 6-12 per cent of its market capitalisation.

OCBC Investment Research maintained its “hold” call on the company on July 3, with a lower fair value estimate of S$1.50, down from S$1.60 previously. The OCBC research team said: “Without clarity on Brazil… we have been reluctant to recommend a “buy” on the stock, though there have been trading opportunities with short timeframes in the past.”

Meanwhile, CGS-CIMB made an “add” call with a lower target price of S$1.75 on SembMarine on July 3. “On the back of slower year-to-date order wins of around S$200 million, we taper our 2019 win expectations to S$1 billion (down from S$2 billion),” it said.

SembMarine on Thursday confirmed that it is in compliance with listing rules.