Sembcorp Marine - RHB Invest 2020-06-09: Stronger Balance Sheet Post Rights; Keep BUY

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

Sembcorp Marine - Stronger Balance Sheet Post Rights; Keep BUY

  • Sembcorp Marine and Sembcorp Industries (SGX:U96) have jointly announced a proposal for a SGD2.1bn recapitalisation and de-merger. This will strengthen Sembcorp Marine’s balance sheet and result in Temasek becoming a direct shareholder of Sembcorp Marine.
  • We view the proposal positively, as this will help Sembcorp Marine better ride through the tough business conditions, although the share price could fall in the short term. We see potential for further restructuring beyond the proposal just announced.
  • Keep BUY, new P/BV-based SGD1.13 Target Price from SGD1.28. See Sembcorp Marine Share Price.





5-for-1 Sembcorp Marine rights issue.



Net gearing to plunge post-rights issue.

  • As of 31 Dec 2019, Sembcorp Marine has a net gearing of 1.82x, which would have fallen to a proforma 0.45x if the transaction was completed in 2019. Sembcorp Marine’s net tangible assets was SGD1.9bn on 31 Dec 2019, and would have risen to SGD4.0bn on a proforma basis.
  • We view the sharply lower gearing a big positive, as this will help Sembcorp Marine better engage potential customers and also to better meet banks’ loan covenants.


De-merger of Sembcorp Marine and Sembcorp Industries via distribution in specie.



Sembcorp Marine shareholders’ approvals are required:

  • An ordinary resolution to approve the rights issue, and a whitewash resolution in respect of the proposed distribution, as this may result in Temasek holding more than 30% of Sembcorp Marine shares. Sembcorp Industries shareholders will separately need to approve the resolution for the proposed distribution. All three resolutions are inter-conditional.


We refined FY21-22 net profit forecasts.



Our new Target Price of SGD1.13 factors in the rights issue.






Leng Seng Choon CFA RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-06-09
SGX Stock Analyst Report BUY MAINTAIN BUY 1.13 DOWN 1.280



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