Sembcorp Marine share price to smash past $0.40?

LIFETIME MEMBERSHIP When will Temasek Holdings drop the bombshell? Speculations of a merger between Keppel Offshore Marine (KOM) and Sembcorp Marine had been brewing for years. In fact, the merger appeared to be looming when Temasek Holdings made a partial offer for Keppel Corp in 2019. However, the withdrawal of the partial offer in 2020 threw a spanner in the works. Even so, most investors expect the merger to take place given the potential for synergy and cost savings. In this context, what will the impact for Sembcorp Marine share price if the merger does occur?

In a bizarre turn of event, Sembcorp Marine will become the global top oil-rig builder following Keppel Corp’s announcement to exit the business within two to three years. Whether this development will enable light at end of tunnel for Sembcorp marine share price is subjected to debate. Nonetheless, the move to pivot its business in the renewable energy industry is encouraging.

Sembcorp Marine share price & the Big Boys

Looking at the SGX Market Depth data (16 April), it seems that Sembcorp Marine share price enjoys good support from the big boys. As can be seen from the above data, there is 91 queue orders of 7,987,600 shares. It means that the support level for Sembcorp Marine share price is $0.195. Once price level drops to this level, there will be a rebound due to the queue orders. On the other hand, the resistance level for Sembcorp Marine share price is $0.205. This is because there are 173 queue orders amounting to 33,916,300.

I have shared that Sembcorp Industries is the best stock that I have ever invested in. In late September 2020, I bought 35,000 shares when Sembcorp Industries stock was trading at $1.35. Then on 7 December, I decided to cash out and clocked in $17,500 of profits. Back in 2020, I was actually very tempted to buy Sembcorp Marine shares when the Group was demerged from Sembcorp Industries. However, due to the business uncertainties and massive rights issue, I decided to give this counter a miss. In 2021, I changed my mind and relooked into the thesis for this counter.

In this article, I will share my outlook for Sembcorp Marine share price in 2021 and also explain my decision to enter this counter. I thought that by blogging down my investment decision-making process, it will serve to strengthen my thought process going forward. Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. I am vested in Sembcorp Marine. Henceforth, this article may be biased.

Green is the new gold

With the US government unleashing US$2 trillion infrastructure plan with a focus in the renewable energy industry, Sembcorp Marine has decided to join in the bandwagon and seeks to gain a slice of the market share in the green energy sector. Indeed, Sembcorp Marine share price surged from $0.16 on 29 March 2021 to a high of $0.215 on 5 April 2021 following the announcement of the $1.12 billion RWE Renewables contract win.

The recent renewable energy contract win is not just pivotal for Sembcorp Marine share price. It could also be a harbinger of things to come as the Group is actively tendering for more than 10 green energy projects. I am of the belief that Sembcorp Marine is in a strong position to win at least 6 to 7 of the tenders because of the company’s track record in project deliveries. The slew of contract wins could turbocharge Sembcorp Marine share price to a high of $0.40.

Sembcorp Marine share price

In 2020, the Group successfully completed a number of greener solutions, namely the Tangguh LNG modules in June 2020, the Offshore Windfarm Jacket foundations for the Hornsea 2 project in August 2020 and the CNTIC VPower Energy, a floating storage unit, towards end-2020.

Sembcorp Marine in royal rumble

Despite its adventure in the renewable energy sector, the core business is still in offshore marine and rig-building businesses. Henceforth, Sembcorp Marine share price will always be judged in accordance with crude oil prices and the international demands for oil rigs.

In 2020, COVID-19 pandemic had caused crude oil prices to collapse. As a result, Sembcorp Marine share price plunged 50%, falling from $1.30 on 4 January 2020 to a low of $0.65 on 23 March 2020 (the day of global market crash). Then on 8 June 2020, the management announced the bombshell recapitalization plan which saw Sembcorp Marine undertaking $2.1 billion of rights issue. Due to expected dilutive effect of the rights issue, Sembcorp Marine share price spiralled out of control to fall to a low of $0.12 in November 2020.

As at 9 March 2021, Temasek Holdings [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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