Sembcorp Marine share price plunging to $0.05?

LIFETIME MEMBERSHIP Sembcorp Marine share price became the talk of the town. And for all the wrong reasons. The $1.5 billion rights issue had led to a devastating meltdown in Sembcorp Marine share price, which plunged from $0.19 to the current low of $0.11. The correction amounted to about 42% across the span of nearly a month. Given the horrendous train-wreck of Sembcorp Marine share price, shareholders have every right to be angry with the management.

From a blue chip among the prestigious Straits Times Index (STI) in 2016 to a cheap penny stock in 2021, Sembcorp Marine share price has become one of the biggest falling stars in SGX. How this counter managed to land in such a dismay state is beyond my understanding. But I reckon what riled shareholders the most is that the previous rights issue of $2.1 billion took place just in September 2020. And now, within a span of less than a year, Sembcorp Marine has come back to ask for more money from shareholders.

Admittedly, I have a special interest in Sembcorp Marine share price because I made a successful contra in this counter in April 2021. Through the volatility of Sembcorp Marine share price, I have made a small profit of $900. It is not exactly an amount to shout about. But the small win validated my thesis that there are opportunities to seize from the volatility of Sembcorp Marine share price. Due to the cyclical nature of the oil and gas industry, I do not advocate a buy-and-hold strategy for oil and gas stocks.

Incidentally, on the day that Sembcorp Marine made the rights issue announcement (24 June), I was seriously pondering to take a significant position in this counter the night before. Boy, was I glad to escape the disaster! Like many investors, I had thought that the worst was over for Sembcorp Marine share price. My hypothesis back then was based on the 1^st quarter business update released on 3 May.

Speaking about the 1^st quarter business update made my blood boils. Based on the 3 May update, the Group claimed that “the Group expects to have the necessary liquidity to fund its operations for the foreseeable future” after they secured a $500 million sustainability-linked financing facility which enabled them to enjoy borrowing costs. Following that, Sembcorp Marine share price was cruising along just fine. Then within the span of six weeks, Sembcorp Marine suddenly dropped the bombshell that they are facing liquidity crisis, hence the second cash call. Most investors, including myself, had absolutely no mental preparation of this sudden turn of events.

One of the most frustrating things about analysing Sembcorp Marine is the lack of quarterly financial reports (since 2020, SGX has removed the requirement for companies to do quarterly reporting). It also does not help that the business update for 1^st quarter did not provide any useful data. Due to this, retail investors could not assess the balance sheet nor the financial health of the Group. To be honest, I do think that this is a serious gap in which SGX should address – mandating listed companies which incurred consecutive losses in three years to issue audited quarterly financial reports.

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 value buy or trap?

29 July 2021 will be destiny day for Sembcorp Marine share price as the Group unveils its 1HFY2021 financial result. Shareholders should embrace for another wave of correction as the Group guided that losses for 1HFY2021 are likely to be in the region of the full year losses incurred for FY2020. In this regard, the losses for 1HFY2021 could be about $600 million.

Based on historical trends, Sembcorp Marine share price plummeted 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. In my opinion, it is still premature to enter this counter now to avoid the risk of catching a falling knife. Essentially, Sembcorp Marine share price is facing a massive crisis of confidence currently.

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