Sembmarine shares rise 1.4% in speculative play on firm's potential merger with Keppel
Singapore
SHARES of Sembcorp Marine (Sembmarine) rose 1.4 per cent on Wednesday as investors appeared to see a heightened possibility of a highly-speculated offshore and marine (O&M) merger.
KGI Securities analyst Joel Ng said that while talks of a merger between Sembmarine and Keppel Corporation's O&M segment "have been going on for several years now", investor optimism has risen on the back of Keppel's Vision 2030 update on Tuesday.
Keppel chief executive officer Loh Chin Hua said that the company would conduct a strategic review of its beleaguered O&M segment, and added, without disclosing specific details, that "all options are available to the group".
Mr Loh had been asked on a call with media and analysts if this would include the merger of Keppel O&M with Sembmarine, or a complete divestment of the business segment.
Sembmarine shares rose from their close on Tuesday at 14.4 Singapore cents to hit an intra-day high of 15.3 cents at 10am on Wednesday. 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 the morning, with some 11.7 million shares changing hands in the first 13 minutes after the market opened.
Sembmarine shares ended the day up 0.2 cent or 1.4 per cent at 14.6 cents. It was the most actively traded counter for the day with some 214.6 million shares having changed hands.
KGI's Mr Ng said "more people have been showing interest in Sembmarine following Keppel's update, as investors grew optimistic about a potential merger".
The brokerage's clients wanted to know if Keppel's plans for the review of its O&M segment had involved Temasek, as well as the timeline of the strategic reviews.
Said Mr Ng: "They need to rightsize their operations because with Keppel O&M and Sembmarine having the two biggest yards, there's definitely an overcapacity and they have to consolidate their operations."
RHB analyst Shekhar Jaiswal said the market likely believes that "a potential consolidation in Singapore's O&M space is imminent" with one possibility including Keppel's divestment of its O&M business.
Mr Ng also said the "key takeaway" from Keppel's update was the strategic review of its troubled O&M sector. He expects the conclusion of the review to be announced by the end of the next three quarters.
