Since my last article on this counter, Sembcorp Marine share price rose from the grave to reach a high of $1.40 in recent days. The spectacular form of Sembcorp Marine share price was surely a welcome sight for investors. This is because this counter had been on a trashy form since its subsidiary in Brazil, Estaleiro Jurong Aracruz Ltda (“EJA”), had been stormed by the Brazilian authorities in early July 2019. The raid was in relation to a corruption probe, nicknamed “Operation Car Wash”.
Needless to say, the market went into overdrive after the announcement of the stunning partial offer by Temasek Holdings for Keppel shares. There were plenty of speculations that a merger between Keppel and Sembcorp Marine is finally on the cards. As a result, Sembcorp Marine share price is on fire.
But is it really the beginning of a much-anticipated recovery for Sembcorp Marine share price? Or yet another false dawn for investors? After all, the pre-conditions to the partial offer seem quite onerous to the extent that it seems like Temasek Holdings is buying an insurance for the deal.
One of the pre-conditions set by Temasek Holdings is that there must be no material adverse change to Keppel’s financial performance following the announcement for the next 12 months. This includes not having “a decrease of NAV of the Group by 10% or more”. And not having “a decrease of 20% or more from the cumulative profit after tax of the Group for the 12 months ended 30 September 2019 of $696 million”. With such pre-conditions for the partial offer, it is too premature to claim that the merger is a foregone conclusion. So expect much volatility for Sembcorp Marine share price in the next 12 months.
On the other hand, investors must be wary that …Read more