Sembcorp Marine share price to rock in 2023?

Is this really light at end of the tunnel for Sembcorp Marine share price? On 27 January 2023, SGX gave the green light for the acquisition of Keppel O&M by Sembcorp Marine through the issuance of 36.8 billion new Sembcorp Marines shares. The SGX nod was a major breakthrough for the merger between the oil-rig giants, heralding the end of a long running saga.

To be sure, the proposed merger is not a done deal yet as it is subjected to shareholders’ voting in an extraordinary meeting to be held on 16 February 2023. Sembcorp Marine must obtain more than 50% votes from its shareholders (excluding Temasek Holdings) in order for the acquisition to go through. Against this backdrop, investors should expect plenty of volatility for Sembcorp Marine share price in the coming weeks.

In the EGM circular, the Sembcorp Marine warned shareholders that there is “no assurance that as a standalone entity, the SCM Group will continue to receive the necessary support from its banks, financiers and significant shareholder, Temasek Holdings (Private) Limited”.

In my opinion, the caution is not warranted as its almost a certainty that shareholders would vote in favor for the merger. And it’s not so much of the expectations of a business turnaround. After 5 long years of numerous false dawns that saw Sembcorp Marine share price collapsing to abysmal levels, shareholders must be disillusioned with the performances of the existing management. As such, many of them must be happy to see the back of the current management.

Under the helm of the current management, Sembcorp Marine recorded 5 straight consecutive years of losses, from $74 million losses in FY2018 to a whopping $1.1 billion losses in FY2021. For FY2022, the management guided that “2H2022 losses to be similar to that for 1H2022”. During this period, two mega rights issues caused Sembcorp Marine share price to plummet to record lows due to the dilutive effects of the rights, which were priced at a discount to its NAV. In addition, the past few years also saw Sembcorp Marine share price trading mostly at below its NAV per share.

What is even more galling for shareholders is that the recovery of the crude oil prices had led to Keppel O&M to record $95 million of profit in 1HFY2022 yet Sembcorp Marine somehow managed to chalk up losses amounting to $143 million during the same period. The latest financial result simply made the tenure of the current management untenable. In this regard, shareholders should be rejoicing that the merger would result in a new management team, with Mr Chris Ong Leng Yeow, the current Chief Executive Officer of Keppel O&M, to be appointed as the new Chief Executive Officer. Apart from Mr Yap Chee Keong, who is an existing director of Sembcorp Marine, the rest of the board of directors would be replaced.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 in new chapter

The new management that is going to be installed should bolster confidence in Sembcorp Marine share price. But in order for that to happen, shareholders must vote in favor of the merger. Standing in the way could be two major concerns among shareholders. The first concern among shareholders must be the [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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