SINGAPORE - Sembcorp Marine (SembMarine) advanced by as much as 5.2 per cent during on Wednesday (Oct 23), hitting a three-month high as interest in the offshore and marine (O&M) player continues to build steam after Monday's partial offer by Temasek to take its stake in conglomerate Keppel Corp to 51 per cent.
SembMarine shares retracked some of those gains by the midday break, but were still up four cents or 3 per cent to $1.39 on 26.1 million shares traded, the most active counter on the Singapore bourse. SembMarine shares have gained 15.8 per cent this week.
Traders have noted that as one of the main local proxies to Keppel Corp, SembMarine's surge this week was unsurprising, with the market fuelled by hopes that a similar offer would be made in due course.
"Judging from trading since Monday, the market is speculating that SembMarine may also be subject to a partial or full offer. This could be a positive for SembMarine over the long term," one dealer noted.
On Tuesday, UOB Kay Hian head of research Adrian Loh wrote: "With Temasek clearly wanting to realise more value in its Singapore-based investments, the obvious stock that has been badly hit by the downdraft in the O&M sector is SembMarine."
Therefore, he added, a restructuring of the business through an "amalgamation with Keppel Offshore Marine - could take place in the medium to longer term once the Keppel offer is completed".
Traders also noted that the announcement of the partial offer for Keppel on Monday was an opportunity to close positions or make a quick flip on related counters.
Mr Loh said: "Clearly, the market has taken a very rosy view towards the prospects of both Sembcorp Industries and SembMarine given that their share prices were up 10.1 per cent and 11.7 per cent respectively after the announcement on (Monday)."
That said, Mr Loh cautioned that "on the earnings front, SembMarine is facing headwinds in the next one to two quarters given that the lack of orderflow (year to date) will impact its bottom line."
CGS-CIMB's Lim Siew Khee is of the opinion that at current valuations, SembMarine's upside could be capped at 10 per cent and with the company having guided for losses in the second half of FY2019, investors can wait for share price weakness to accumulate the stock at a later time.
Keppel Corp shares advanced $0.03 or 0.5 per cent to $6.71, while Sembcorp Industries shares were up $0.01 or 0.5 per cent up at $2.24 at Wednesday's midday break.
Temasek has a 49.5 per cent interest in Sembcorp Industries, parent of SembMarine.