This is unless the market views its S$1.5bn loan to Sembcorp Marine being converted into equity as negative.
Sembcorp Industries (SCI) is a major shareholder of SCM with a 61% ownership and … This is because Temasek is the largest shareholder of Sembcorp Industries, so at the minimum, it will have a close to 30% stake in Sembcorp Marine post demerger or up to 58% if no existing public Sembcorp Marine shareholders subscribe for the rights.With a > 50% majority stake in Sembcorp Marine, I reckon the next step could the merger of Sembcorp Marine with Keppel’s O&M division upon Temasek gaining majority control of Keppel which is slated to be completed before October 2020.Sembcorp marine’s existing shareholder might not want to approve the huge dilution that comes with the rights issue.
Sembcorp Industries (SCI) convened and held its Extraordinary General Meeting (EGM) by way of electronic means via live audio-visual webcast / audio-only stream on Tuesday, August 11, 2020. Subsequently, I guess that Temasek will make an offer to buy up the rest of Sembcorp Marine at the cheap to combine its operations with Keppel’s O&M division (upon taking majority ownership of Keppel) to form one single entity that is cost-competitive enough to compete against our Korean and Chinese counterparts.So, the biggest winner seems to be Temasek from this deal?For existing Keppel’s shareholders, this news should be seen as positive on the surface and one step closer towards the ultimate divestment of its stake in Keppel O&M to Temasek.The question lies ultimately in the “sale price” of its O&M entity which is likely to be undervalued in its books.To me, this doesn’t look like positive news for Sembcorp Marine which the market seems to imply before the halt of its and Sembcorp Industries’ share price (Sembcorp marine’s price jump from S$0.76 to S$0.85).Existing Sembcorp Marine’s public shareholders will need to take a gamble by subscribing to its rights and banking that Temasek will ultimately provide a better deal to take over the rest of the company in full (before its cash runs out again) or choose to walk away and be significantly diluted by not partaking in the exercise of this right.For existing Sembcorp Industries’ public shareholders, though the Implied terms might not be the best, this is probably a scenario that needs to happen for the company to grow in its core utilities/energy operations without concerns of having to backstop its marine business.The company’s valuation multiple could see a subsequent valuation re-rating if management can demonstrate greater resilience and growth in its core utilities/energy business post its marine demerger.This is likely a prelude to the ultimate merger with Keppel O&M, which can only materialize if facilitated by Temasek. Sembcorp Marine (SCM) is seeking to raise S$2.1 billion by issuing 5 rights shares for every 1 share owned, at a conversion price of S$0.20 per share. We won’t know if the company might ultimately have to write-off a huge chunk of its shareholder’s loan given to Sembcorp marine.For those who are interested in finding out my thoughts on Sembcorp Industries’ fair value in a follow-up article to this one, check out the link below:For Sembcorp marine’s shareholders, the choice is harder. There are 2 parts to this deal: Sembcorp Marine will issue a renounceable rights issue of 5 rights shares for every 1 existing Sembcorp Marine share at S$0.20.This is not to acquire some assets but to re-capitalize SMM.. The company was founded on April 25, 1963 and is headquartered in Singapore.
Sembcorp Marine Sembcorp Marine Ltd. is an investment holding company, which engages in the provision of management services. However, the medium-term share price trend for Sembcorp Marine remains cloudy, particularly when shares are made available for Sembcorp Industries public shareholders to be sold in the open market. a 76.5% discount to the Last Close Price and a 31% discount to the Theoretical ex-rights Price (TERP) of S$0.29 based on last 5-Day VWAP (of S$0.74/share)
There was a huge disappointment when Sembcorp Industries subsequently announced that the key restructuring was the potential monetization of its India utility business through an IPO. Over the past six months, the relative strength of its shares against the market has been -67.81%.
That till today has not materialized.This demerger will allow Sembcorp Industries to be the largest pure utilities/energy blue-chip player in SGX which I believe will find favor among investors and institutional portfolio managers who have strict mandates to only invest in pure utility company for their earnings and dividends stability.Hence, I sense that the market will take this news favorably for Sembcorp Industries. S$0.30, potentially as soon as when the shares are un-halt. Sembcorp Marine Ltd. is an investment holding company, which engages in the provision of management services. This is unless the market does not believe that the deal will go through.For Sembcorp Industries as mentioned, there is no actual cash transaction to Sembcorp Marine, but its outstanding S$1.5bn loan to Sembcorp Marine will be converted to equity.
However, Sembcorp Industries does not have to fork out real cash as this S$1.5bn rights will go towards offsetting the S$1.5bn loan it provided to Sembcorp Marine back in 2019 under the Subordinated Credit Facility.The other S$0.6bn will come either from the existing Sembcorp Marine’s shareholders (which currently own the other 39% of the company) or from Temasek through a sub-underwriting agreement with DBS if it is not being taken up by Sembcorp Marine’s shareholders.This proves to be a dilemma for existing Sembcorp Marine shareholders which could see their stakes being diluted from For every 1 existing Sembcorp Marine share, shareholders are entitled to 5 Sembcorp Marine Rights Shares at S$0.20/Rights Shares.According to Sembcorp Group, this is approx. Sembcorp Marine - UOB Kay Hian 2020-02-21: 2019 Worse Than Expected; Not Out Of The Woods Yet. Registration on or use of this site constitutes acceptance of our Price trends tend to persist, so it's worth looking at them when it comes to a share like Sembcorp Marine.