Hot stocks: Keppel and Sembcorp Marine fall more than 6%

SHARES of offshore and marine conglomerates, Keppel Corp and Sembcorp Marine, took a dive on Thursday, on renewed jitters over the potential bankruptcy of their largest client for deep-water rigs, Sete Brasil.

By the end of Thursday's session, Keppel had closed at S$4.86 a share, falling 6.4 per cent, or 33 Singapore cents. More than 17 million shares were traded.

Sembcorp Marine closed 6.8 per cent - or 10 Singapore cents - lower at S$1.37 a share. More than 7 million shares changed hands.

Brokers said the two stocks are being haunted by fresh media reports speculating on the potential financial dents on the Singapore groups if Sete Brasil does indeed file for bankruptcy.

Sete Brasil has orders for seven drillships with Sembcorp Marine and six semi-submersibles with Keppel that make up around 40 per cent of each of their outstanding orderbooks of S$11.6 billion and S$10 billion (as of the third quarter of 2015), respectively, according to The Motley Fool.

According to analysts, Sembcorp Marine and Keppel Corp have already recognised revenue from Sete Brasil projects of S$2.5 billion and S$2.0 billion, respectively, with a portion of the recognised revenue yet to be collected and are thus still considered as account receivables.

"If the bankruptcy filing for Sete Brasil does happen, both Sembcorp Marine and Keppel Corp would most likely have to impair their outstanding orderbooks and revenues that have already been recognised from the Brazilian company's projects," the financial portal added.