Hit By Crude: A Look Into Sembcorp Marine (SGX:S51)

 

With our recent highlight on SGX listed Offshore & Marine players, since Willie had previously touched on Keppel Corporation Ltd (SGX:BN4), we felt that it was fitting to bring in their competitor, the second largest jack-up rigs producer Sembcorp Marine Ltd (SGX:S51).

2013 also the 50^th anniversary for them, Sembcorp Marine definitely wasn’t a new kid on the block yet they have still strived to improve their operations. An example was the recent opening of Sembmarine’s Integrated Yard @ Tuas with the event graced by the Prime minister of Singapore Mr Lee Hsien Loong on 6 Nov 2013. This 73.3 hectare new yard was just phase 1 of their planned 206 hectare new yard! This would enable Sembcorp Marine to serve a wide range of vessels and rigs!

 

What Does Sembcorp Marine Do?

Basically Sembcorp Marine has five core operations:

• Ship Repair: From tankers to VLCC to container ships and even navy vessels!
• Shipbuilding: Design and construction
• Ship Conversion and Offshore: Basically changing stuff up into stuff for other use
• Rigbuilding: 2^nd in the world behind Keppel Corp
• Offshore Engineering and Construction: Customised solutions for clients

Sembcorp Marine’s breakdown in terms of Revenue for their top 3 segments was as follows:

 

With Rig-building at the core of their operations (65% of FY2013 Revenue), it was of no surprise that they were heavily affected by the drop in crude prices with a perception of lower demand for their services resulting in them being in the bottom 3 performers of the STI in 2014.

 

In Asia, It’s Important To Know Who The Majority Shareholders Are. So Who Owns Sembcorp Marine?

 

Taken from Sembcorp’s 2013 Annual Report, as of 6 March 2014, Sembcorp Marine was 60.67% owned by Sembcorp Industries Ltd (SGX:U96), their parent company. And Sembcorp Industries was in turn held by, you guessed it, Temasek Holdings (Private) Limited. So in essence, Temasek had significant interest in Sembcorp Marine through their holdings of Sembcorp Industries!

An interesting fact was that 99.15% of shares were held by investors in Singapore!

 

Value In Action

With Sembcorp Marine having close to a 28% drop in share prices for 2014 (That was close to a S$2.6 billion wipe out of market value!), does this present an opportunity for investors?

Find out more from our recent article “Are There Any Opportunities With Oil’s Recent Plunge?” 🙂

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All views and opinions articulated in the article were expressed in Mun Hong’s personal capacity and do not in any way represent those of his employer and other related entities. Mun Hong does not own any shares in the companies mentioned above.

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