Markets May Be Smelling a Sembcorp Marine Deal

By FeaturesDow Jones Newswires

Sembcorp Marine Ltd. (S51.SG) shares logged their best week since 2009 with a 23% jump last week, and they have surged another 10% the past two days, as investors poured cash into the stock.

The company was queried by Singapore Exchange on Tuesday regarding the ongoing gains, and Sembcorp Marine pointed to recent analyst upgrades as the only possible reason it knows of for the surge. It added the company is in compliance with Singapore's disclosure rules and would inform the markets if there was a material development.

Continue Reading Below

The company's parent, Sembcorp Industries Ltd., in May announced a review of its operations soon after a new chief executive took charge of the conglomerate. That review was set to be concluded by year's end, but a Sembcorp Industries spokeswoman said it was still ongoing. She declined to comment regarding any possible deal for Sembcorp Marine.

Potentially, Sembcorp Marine could be taken private or merged with local rival Keppel Corp. Keppel is the world's biggest producer of offshore oil rigs and Sembcorp Marine is the second largest. Shares of both have been pummeled in recent years by slumping orders as oil prices plunged, crimping appetite for oil drilling.

DBS Vickers thinks a merger with Keppel could be on the cards and there is less of a chance Sembcorp Industries will take its marine arm private.

There could also be a possibility that Sembcorp Marine revives its plan to turn one of its yards into a waterfront township. The 87-hectare project, if developed, could boost Sembcorp Marine shares' fair value by as much as 1 Singapore dollar (US$0.76), DBS Vickers added. Sembcorp Marine's market capitalization is about S$5.33 billion and its shares last traded around S$2.55.

The rigbuilder could also be getting a lift because crude oil prices have been recently hitting three-year highs. Keppel shares rebounded 27% in 2017, its first annual gain since 2013. Until last year's 33% advance, Sembcorp Marine's stock hadn't logged a full-year advance since 2012.

Write to Gaurav Raghuvanshi at gaurav.raghuvanshi@wsj.com

(END) Dow Jones Newswires

January 23, 2018 03:33 ET (08:33 GMT)

Continue Reading Below