Sembcorp Marine shares shot up more than 10 per cent at one point yesterday after parent company Sembcorp Industries said the group will undertake a strategic review of its businesses.
The announcement on Wednesday helped revive an old market rumour about a possible merger between SembMarine and rival Keppel Offshore and Marine (Keppel O&M).
SembMarine stock jumped to as high as $1.815 around 11.30am yesterday, before easing to close at $1.79 - still 9.1 per cent, or 15 cents, up on Wednesday's close.
Meanwhile, Sembcorp Industries shares were also up strongly, rising 5.7 per cent, or 17 cents, to close at $3.17 - after the group reported an 11.3 per cent jump in first-quarter net profit to $119.1 million.
"As we position Sembcorp for the future, our focus will be on performance, sustainability and value creation," Sembcorp Industries group president and chief executive Neil McGregor said in the group's earnings announcement.
Mr McGregor took over from Mr Tang Kin Fei last month.
"We face a challenging macro-environment with rapidly changing market dynamics. This requires us to focus on cost discipline and strengthening operating performance," he said.
"As we reshape Sembcorp, we will continue to build businesses that are durable and sustainable."
DBS analyst Ho Pei Hwa noted in a report that the strategic review - the outcome is expected in about six months - is fuel for speculation.
"While it is premature to shed more light on the future direction of Sembcorp Industries, it might revive market speculation on potential rationalisation of the three home-grown industrial plays, namely Sembcorp Industries, SembMarine and Keppel Corporation," said Ms Ho.
She noted that DBS has flagged the possibility of a merger between SembMarine and Keppel O&M amid the structural downturn since August 2015. "The spin-off of its marine arm could re-rate Sembcorp Industries' undervalued utilities business that is currently overshadowed by the weak marine outlook."
At the same time, speculation that SembMarine could be taken private has also been making the rounds from as early as the start of last year.
Separately, CIMB said in a report it does not expect a big shake-up in Sembcorp Industries' core businesses - utilities and urban development - in the short term, and that the marine operations will likely remain as an "investment".
"Group-wise, we do not expect full divestment of SembMarine, but possibly a partial divestment of its stake below 61 per cent (in the) short term," it added.
Besides news about the strategic review, the solid showing in SembMarine shares could also have been due to the resurgence of blue chips over the last two days, said remisier Desmond Leong.
"SembMarine shares have been sold down for quite some time, so a bounce is due as well, especially now that there could be good news."
SembMarine reported a 28.8 per cent drop in first-quarter earnings to $39.6 million last month, although it said it is "cautiously optimistic" about new orders amid a stabilising market.