Sembcorp Marine - DBS Research 2019-07-03: Brazil Yard Under Investigation

SEMBCORP MARINE LTD (SGX:S51) | SGinvestors.io SEMBCORP MARINE LTD (SGX:S51)

Sembcorp Marine - Brazil Yard Under Investigation

  • Brazilian authorities executed a search warrant on Sembcorp Marine’s Brazil yard, EJA.
  • Former president of EJA assisting in investigations.
  • Ongoing investigations will remain an overhang.
  • Stock has underperformed YTD pending weak contract flow.



What’s new



What’s the impact


  • Sembcorp Marine understands that the search is in relation to investigations against Mr Esteves de Jesus, a former Brazil. GDJ has been arrested by the Brazilian Martin Cheah Kok Choon (Martin), the former president of EJA.
  • A Brazil local newswire has held four overseas accounts for monies related to crimes of Swiss Authorities confirmed that in ~US$9m to accounts held abroad by Martin, then president fractional transfers.
  • At this juncture, investigations are ongoing and market talk is rife. The implications to Sembcorp Marine is a worst case scenario for Sembcorp Marine could amount to a penalty of S$20400m (approx 35%-70% of KEPPEL CORPORATION (SGX:BN4)’s), this would to ~8-17% of Sembcorp Marine’s book value and ~6-12% of its believe the penalty, if any, will likely be closer to the EJA’s shorter operating history and non-US involvement on the Brazilian contracts.


Recommendation






Pei Hwa HO DBS Group Research | https://www.dbsvickers.com/ 2019-07-03
SGX Stock Analyst Report BUY MAINTAIN BUY 2.400 SAME 2.400



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