Why are Sembcorp Marine shares rising?

• SembCorp Marine Ltd (SGX: S51) share price rose to an intraday high of S$0.112 on Tuesday (21 June 2022)
• The offshore and marine company reiterated the benefits of a proposed merger with Keppel Offshore and Marine
• CIMB analysts have kept a ‘hold’ call and target price of S$0.09 on the stock
• Keen to trade Sembcorp Marine shares? Open an account with us to long or short the stock.

Sembcorp Marine stock price: what’s the latest?

Sembcorp Marine shares rallied as much as 6% on Tuesday, after the company released responses to a new batch of shareholder queries on its proposed merger with Keppel Corporation’s offshore and marine unit (Keppel O&M).

Despite a mixed reception to the proposed merger, Sembcorp Marine shares have risen by approximately 11% in the last one month.

The counter has an average rating of ‘underperform’ and an average target price of S$0.097 a share, according to the latest SGX StockFacts data.

The price target represents a 15.5% downside possibility, based on the stock’s last traded price of S$0.112 a share on Tuesday (21 June 2022).

The latest rating came from CIMB’s equity research team, who reiterated a ‘hold’ call and target price of S$0.09 on 14 June 2022. The analysts wrote that they ‘see potential for discount to narrow post-merger completion’ as Sembcorp Marine ‘can ride on Keppel O&M’s order wins’.

What did Sembcorp Marine say in the new responses?

In its new response to a question about the rationale for the proposed merger, the company said it ‘offers the best way forward for Sembcorp Marine to play a long-term role in meeting the changing needs of its customers in the O&M sector, who themselves need new, cleaner energy solutions’ amid ‘unprecedented times’.

‘The proposed combination will create a premier global player with a deep engineering heritage to offer offshore renewables, new energy and cleaner solutions in the O&M sector, creating significant value on multiple levels for all its stakeholders,’ it added.

The combined entity is also envisaged to unlock synergies from the integration of two established industry players, said Sembcorp Marine. Specifically, the restructured Keppel O&M will bring a net order book of S$5.1 billion, which would add to the S$1.3 billion net order book of Sembcorp Marine.

The gearing of the merged company on a proforma basis is also lower at 22% compared to 33% for Sembcorp Marine on a standalone basis.

‘The Board of Directors has considered various strategic options and believes that the proposed combination, which is a non-cash transaction, is the best and most compelling way forward for Sembcorp Marine to unlock long-term value for all of its stakeholders,’ the company stated.

Keen to trade Sembcorp Marine shares?

Go long or short via CFDs on Sembcorp Marine and other Singapore shares with our award-winning platform.* Open an account with us to start trading shares immediately.

_{*Awarded the Best Online Trading Platform by Influential Brands in 2021.}