Sembcorp Marine - OCBC Investment 2016-11-16: Disposes interest in COSCO Shipyard Group, removed from MSCI

Sembcorp Marine - OCBC Investment 2016-11-16: Disposes interest in COSCO Shipyard Group; removed from MSCI SEMBCORP MARINE LTD S51.SI

Sembcorp Marine - Disposes interest in COSCO Shipyard Group; removed from MSCI

  • Sembcorp Marine (SMM) has entered into a sale and purchase agreement with China Ocean Shipping (Group) Company (COSCO) to dispose of its 30% interest in Cosco Shipyard Group (CSG), which was acquired in 2004. 
  • Following this, SMM will only be left with its 4.98% shareholding in Cosco Corporation (Singapore) Ltd, which in turn has a 51% equity interest in CSG. 
  • The aggregate consideration is about S$220.7m and the net proceeds represent a gain of about S$48.3m over the carrying value of the investment. This disposal was undertaken as CSG is no longer a strategic investment nor a core asset of SMM. 
  • Going forward, poor performance of CSG will also be less of a drag on SMM’s poor results. Indeed, the net loss (before tax) attributable to the CSG shares being disposed of is S$30.7m, vs. S$69.3m pre-tax profit for SMM in 9M16. 
  • On a separate note, SMM has also been removed from the MSCI Singapore index in the latest review. We believe this would have a greater impact on the stock compared to its earlier removal from the STI-30 list, as most funds are benchmarked to MSCI indices.
  • Maintain SELL with S$1.13 fair value estimate on SMM.




Low Pei Han OCBC Investment | http://www.ocbcresearch.com/ 2016-11-16
OCBC Investment SGX Stock Analyst Report SELL Maintain SELL 1.130 Same 1.130




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