Sembcorp Marine share price (SGX: S51) thrown under the bus

LIFETIME MEMBERSHIP For Sembcorp Marine share price (SGX: S51), is it a case of light at end of tunnel or light from an on-coming train? Given the devastating meltdown of Sembcorp Marine share price (SGX: S51), investors can ill-afford to ignore this rhetoric. The $1.5 billion announced on 24 June 2021 had erased more than 50% from Sembcorp Marine share price, causing the counter to plunge from $0.17 to $0.08. Question now: is there any value left in Sembcorp Marine share price? Make no mistake, sometimes cheap does not mean value.

Sembcorp Marine share price S51

Investors who had subscribed to the 2020 and 2021 rights issues should be betting on the recovery of Sembcorp Marine share price (SGX: S51). While that day may eventually come, it could be a long wait. To put things into perspective, the oil and gas industry suffered a severe downturn since 2015 due to the collapse of oil prices and emergence of US’ shale oil. The pandemic arrived to cause a protracted downturn for Sembcorp Marine. In addition, the long-term demand for crude oil is likely to drop as countries commit to the United Nations Framework Convention on Climate Change (UNFCCC) pact signed in 2015.

Looking at the financial track record, the road ahead will be challenging for Sembcorp Marine share price (SGX: S51). Due to the series of “unfortunate events” in recent years, the Group’s financial performance had been affected, resulting in pre-tax losses of $101 million in FY2018, $177 million in FY2019 and $671 million in FY2020. The Group also recorded a substantial net loss attributable to owners of the Company of $647 million for 1H2021. Barring a miracle turnaround, the loss for FY2021 should be double that of FY2020.

Needless to say, the crisis of confidence for Sembcorp Marine share price (SGX: S51) centred on the issuance of the $1.5 billion rights issue, which took place less than a year after the $2.1 billion rights issue in 2020. The Group explained that the $600 million raised from last year’s $2.1 billion rights issue was insufficient to meet the working capital needs due to higher manpower costs and additional costs due to work re-scheduling. To add oil to fire, the delivery rescheduling of two Transocean drillship resulted in the deferral of cash collection of $610 million during FY2021 and FY2022 to FY2023 and beyond. This impacted the working capital position and affected funding support from the banks.

Sembcorp Marine share price plunging to $0.05?

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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 not vested in Sembcorp Marine at the moment. Whether Sembcorp Marine share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

Sembcorp Marine share price (SGX: S51) thrashed by short-sellers

On 30 October 2020, Sembcorp Marine share price (SGX: S51) crashed to a low of $0.110 following last year’s rights issue. The 2020 rights issue was priced at $0.20. Given that the latest rights issue is priced at $0.08, it is reasonable to expect Sembcorp Marine share price to crash to a low of $0.05 by end of this year. This is especially so with short-sellers lurking around.

Based on data extracted from SGX, the largest short sales against Sembcorp Marine share price took place in the week of 21 June (226 million shares) and 28 June (259 million shares). The massive short-selling caused the counter to tank from $0.17 to $0.10, representing a correction of 41% within the span of two weeks. However, in July, institutional investors surprisingly bought into Sembcorp Marine shares. Fund houses net bought $8.3 million worth of shares, making the counter one of the top ten net institution net buy stocks.

BullionStarThe buying in from the big boys helped to break the steep fall of Sembcorp Marine share price. Nonetheless, I do not think that current Sembcorp Marine share price will hold the fort for long. Based on data from Monetary Authority of Singapore’s SPRS, there is a staggering [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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