WILL SEMBCORP MARINE STOCK BE PRIVATISED?

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Dear readers, Sembcorp Industries released its new strategy for the future last week arising from the completion of the much awaited Strategic Review of the Group. The highlight of Sembcorp’s new strategy is the repositioning of its utilities business as an integrated energy player. And other than this highlight, there is no inkling from the new strategy on what some of the investors like myself are looking for: the possibility of the privatization of Sembcorp Marine, a subsidiary of Sembcorp Industries since there is no any mention of this.

I believe investors like myself who have been exploring the possibility of Sembcorp Marine being privatized may be a tad disappointed at the outcome of the Strategic Review of Sembcorp Industries. I believe the non-mention of any privatization possibility of Sembcorp Marine, coupled with the poor financial showing of Sembcorp Marine leads to the “southing” of Sembcorp Marine in the recent trading sessions.

Technically, Sembcorp Marine stock is oversold with the closing price at $2.18 yesterday. With its stock price crossing from above its 50-Days-Moving-Average, I believe Sembcorp Marine stock will head further south next. The technical “floor” of Sembcorp Marine stock is at $1.90 and I believe the stock should find support at this level.

As an investor who always believe in that the consolidation of the offshore marine sector here in Singapore will have more competitive advantages of Singapore, I view the exclusion of any mention of the privatization of Sembcorp Marine from the Strategic Review as not necessary meaning that privatization of Sembcorp Marine stock will not happen. In fact I believe the opposite is even more possible now for the following reasons:

1) First, from the new strategy of Sembcorp Industries, I garnered the sense that Sembcorp Industries will be focusing more on its energy business. This will make the other non-energy units like Sembcorp Marine less attractive and hence the more incentive to divest.

2) Second, the recent developments have lead Sembcorp Marine stock price to trend lower. This could only make Sembcorp Marine stock an even more attractive target for any privatization or M&A activities. We shall see whether Sembcorp Marine stock will eventually be privatized next.
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