by winston » Mon Jan 22, 2018 10:15 am
not vested
Sembcorp Marine: An offer coming?
Sembcorp Marine’s share price spiked 9.4% on Tue last week and another 9.5% on Fri.
There can be several reasons behind this, such as
1) a potential privatisation or divestment by SCI,
2) no fine or small fine with regards to Brazil as opposed to Keppel Corp, or
3) a big order is coming up.
However, judging from the recent price action, the possibility of scenario 1 seems quite likely. Currently, SMM is trading at 1.9x P/B, which is higher than the +1 s.d. level based on a three year historical average.
In mid-2015, SMM also traded at 1.9x book and Brent then was around US$66/bbl which is similar to the current price.
We have been valuing SMM at 1.85x book but had earlier trimmed the book to be conservative post Keppel Corp’s S$590m fine.
We adjust our estimated book value and increase our P/B to 2.0x, arriving at a fair value estimate of S$2.37.
Should an offer for SMM materialize, there could still be some upside supposing the price offered is higher, which is typically the case to entice shareholders to bite.
Assuming a 20% premium from current levels, this would translate to about S$2.76/share.
Source: OCBC
It's all about "how much you made when you were right" & "how little you lost when you were wrong"