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SembCorp Industries and SembCorp Marine: Recovery?

Thursday, January 22, 2015

Here are a couple of interesting chart formations:

SCI. A long white candle formed on a high volume day.
It could be a double bottom formation.
The MACD has formed a higher low.
Neckline approximates $4.50
If that should break, eventual target is provided by the declining 200d MA (the light blue line) which is approximating $5.00 now.

SMM. Another long white candle formed on a high volume day.
Looks like it could be a double bottom formation too.
The MACD has formed a higher low.
Neckline approximates $3.30.
If that should break, the declining 200d MA is the eventual target.
Currently, the 200d MA approximates $3.70.

Based on TA, SCI and SMM look promising.

44 comments:

Sillyinvestor said...

AK,

As a shareholder of SCI, I do hope u are right.

:)

Fundemental wise, I believe it to be a long slog ... U know what, I think with order book till 2019, and strong order till 2016. I actually do not really mind the drought of orders.

Faster balance of supply and demand

AK71 said...

Hi Mike,

Oh, dear. What do you hope I am right about? What did I say? -.-"

If you mean the bit about how things look promising, I know I am right. Things do look promising. ;)

However, whether that promise is going to be delivered, I have absolutely no idea. -.-"

BP said...

Awwww.... There goes my chances of getting it cheaper.

Wait... What would happen if oil drops further to low 40s?

AK71 said...

Hi BP,

Well, TA is about probability. Signals and formations have been known to fail. ;p

Rebel said...

I am still waiting for my lower prices.

iwimsasl said...

I said I'll wait for SCI to go below $4 or CO future to stablise @ US$50 +/- 10% before it's safer to enter.

Well, the latter is happening but need confirmation while the former is yet to be seen. Thus, I chose to nibble closer to $4.10.

Should CO price fall to 40 or below as predicted by some experts, it will cause another major correction for which I'm sure can get SCI cheaper.

yeh said...

ak

that day i am queuing for SCI 4.1 and semb marine 2.9

but i didn get it.

i have both of it . 8 lot each.

well, are you going to sell once they reach your projected target price?

hehehehe:) i think you are aiming higher price

Sanye ◎ 三页 said...

OH NO AK, what have you done?!

See the buy Q on SCI and SMM?

Just joking lah. As a long term share holder of these two counter, I do hope the price will go up. But was waiting to top-up SCI at 4....

AK71 said...

Hi yeh,

Over the long term, if we believe that crude oil's price will be much higher, then, both SCI and SMM are good long term investments.

However, as you know, I am not averse to trading around my core positions. So, if my bowling ball is accurate, I might sell some. ;)

AK71 said...

Hi Sanye,

Oh, no! What did I do? I blur liao...

Cham. I also want to buy more SCI at $4.00 a share wor. -.-"

yeh said...

hi ak
i queued SCI 4.10 few days ago can not get leh.

btw do u think keppel corp at 8.30 good buy?

AK71 said...

Hi yeh,

I don't know. Haha.. I think you expected the answer. ;)

I still don't like that a big portion of its income is from Keppel Land which will continue to see weakness in performance.

I rather prefer SembCorp Industries for its utility businesses in various countries. :)

AK71 said...

Keppel Corporation on Thursday (Jan 22) warned of challenges facing the offshore and marine industry as it reported a 6.1 per cent rise in net profit for the fourth quarter of 2014.

Keppel Corp, the world's biggest builder of offshore oil rigs, earned S$725.9 million for the three months ended December, up from S$684.4 million a year earlier.

The higher earnings were due mainly to a turnaround in its infrastructure division, which posted a pre-tax profit of S$303 million compared to a loss the year before. This helped offset lower contributions from Keppel Corp's property arm.

"The fall in oil prices, the expected reduction in global oil and gas upstream spending and the projected oversupply of oil rigs has created a challenging environment," Keppel Corp said in a stock market filing on Thursday.

Keppel Corp added, however, that its healthy order book will keep its yards busy for 2015 and 2016, thanks in part to the S$5.5 billion in orders secured by its offshore and marine division last year.

Source:
http://www.channelnewsasia.com/news/business/singapore/keppel-corp-warns-of/1608640.html

AK71 said...

Oil prices jumped in early Asian trading on Friday as news of the death of Saudi Arabia's King Abdullah added to uncertainty in energy markets already facing some of the biggest shifts in decades.

The Saudi King's death comes amid some of the biggest shifts in oil markets in decades. "The fear of the unknown is going to be supportive to crude oil prices," said John Kilduff, partner, Again Capital LLC in New York. "King Abdullah was the architect of the current strategy to keep production high and force out smaller players instead of cutting," he added

Source:
http://www.businesstimes.com.sg//energy-commodities/oil-jumps-after-saudi-kings-death-amid-huge-market-shifts

boonchin.ng said...

4Q14 earnings disappoint as all eyes focus on Friday
analyst briefing to explain trading halt of KEP, KPLD
4Q14 “recurring” earnings disappoint as O&M margins surprise as it
trends lower: Keppel Corp reported a solid 4Q14 “headline” net profit of
S$726mn, up 6.1% y/y. However, on excluding one-offs (namely S$194mn
profit on sale of data centre assets & equity plaza, S$145mn gain on disposal of
group’s interest in MBFC Tower 3 and S$42mn gain from disposal of
subsidiary), 4Q14 “recurring” net income came in at S$290mn (down 12.5%
y/y) with FY14 “recurring” net income at S$1311mn vs. FY14 JPMe net
income of S$1418mn, 7.5% lower than expected with the key miss driven by
property division. O&M posted operating margins at 13.2% in 4Q14 (vs. 3Q14
at 15.0% vs. 14.2% in 4Q13). FY14 O&M EBIT margins came in at 14.3% in
line with JPM FY14 estimate.

 Keppel Corp analyst briefing tomorrow at 2pm; is it KPLD privatization?:
With Keppel Corp as well as Keppel Land under trading halt (since Thursday
morning), we believe one of the possible reasons may be possible privatization
of Keppel Land by Keppel Corporation as management sees challenges emerge
in the O&M business on potential rig oversupply. However, in case it is to be
the privatization of KPLD, we believe KEP management would look to
undertake this via an equity swap rather than a cash buyout (to preserve cash
holdings). However, given this is NOT a joint analyst briefing, it may
potentially be something else (other than privatization).

Source:
CIMB Securities(Singapore)Pte Ltd

AK71 said...

Keppel Corp., the world’s biggest builder of offshore oil rigs, offered to buy out shareholders in Keppel Land Ltd., Singapore’s third-biggest developer by value, aiming to take the company private.

The rig builder will offer S$4.38 to S$4.60 a share for Keppel Land stock, the company said in a statement to the Singapore stock exchange today. That’s a premium of 26 percent over the real estate developer’s last trading price of S$3.65 on Tuesday in Singapore. Shares of both companies were halted from trading from Jan. 21. The rig maker already owns 54.6 percent of the real estate company.

Source:
http://www.businessweek.com/news/2015-01-23/keppel-corp-dot-to-offer-26-percent-premium-for-keppel-land-shares

Casey said...

Hi Ak,

The ability of Kepland to grow its value is amazing, it is sad that this fabulous company might no longer available to retail investor. I don't have a sense happiness receiving this news, the offer is good at current price, however, if the offer is delayed a few years later, it could be most likely more attractive given the exposure of kepland in commercial segment in many attractive venues. We are unable to pick the fruit when it is ripe 2-3 years later.

My short live investment in Kepland will end soon with a smallish 30% gain. Hope that other value counters like SCI, WingTai and Saizen can sustain longer growth.

Besides, Recent visit to Japan, seeing most retail venues flooded with shoppers, the business seems extremely well compare to last year. A sign of drastic recovery?

Casey.

AK71 said...

Hi Casey,

Congratulations on a nice capital gain after being invested in Keppel Land for only a short time. :)

I certainly hope that Saizen REIT, Wing Tai and SCI will do much better in the years to come as well. ;)

BP said...

Hmmm... What would this mean for kep corp?
Do they have the cash for this? Looks like near term price is going to drop?


AK71 said...

Keppel Corp said it is offering a base offer price of S$4.38 for each Keppel Land share. A higher offer price of S$4.60 per share will be paid if Keppel Corp is entitled to exercise its rights of compulsory acquisition.

Explaining the rationale for the offer, Keppel Corp CEO Loh Chin Hua said Keppel Corp wants to be a strong conglomerate with sizeable contributions from its three core businesses. "This is a sound and well-timed investment in a business which has been integral to Keppel Corp and is in core markets like Singapore, China, Indonesia and Vietnam - where we hold a long-term positive view," he added.

Kepland shares were last traded at S$3.65.

Source:
http://www.channelnewsasia.com/news/business/singapore/keppel-corp-launches-bid/1610298.html

AK71 said...

Hi BP,

At $4.60 a share, Keppel Corp would have to fork out some $3.67 billion to take Keppel Land private.

Keppel Corp has about $5 billion of cash on hand. So, they have the resources to do this. However, the balance sheet would be severely weakened in the process, bearing in mind that they also have more than $7 billion in borrowings.

I am not sure how Mr. Market would like this development. -.-"

Casey said...

Hi Ak,

If Kepcorp drop further, it will be a good chance to grab this progressive stock at a great price!

It is a major shift in future revenue mix, isn't it should be evaluated differently? Still an O&M stock?

Casey

AK71 said...

Hi Casey,

Taking Keppel Land private would change the revenue mix for Keppel Corp, for sure. However, a back of the envelope calculation shows that although the real estate arm's contribution would increase, it wouldn't really overshadow the marine business. It would be more of an equal weight.

Privatising Keppel Land at a small premium to valuation would weigh down Keppel Corporation's valuation in the near term.

Casey said...

Hi Ak,

The NAV of Kepland is 4.95, Kepcorp is still paying it at a small discount. The move is indeed a visionary move to me, I hope that other companies like OUE has the similar wisdom, which I also vested as defensive play. I do not really see the increased gearing to 0.41 is a real issue given the background of Kepland is unparalleled and the fact that it has 12.5bil order book, and the fact that USD is strengthening (the bigger risk: contract value). Good debt and bad debt, the absorption of Kepland will also its debt, debt is an important instrument in managing inflation and currency risk, and cash flow is important instrument in managing gearing risk, I will be very afraid if a company has no wisdom in using debt. From the joint development of Marina Financial Centre to the acquisition of Array Real estate, it is indeed a state of the art strategist plan. Now, how about the big piece of reclaimed land parcels at the marina area, the movement of Seaport to Tuas? to grab these opportunities, Kepcorp need the financial flexibility and synergy by gathering strength from different units. Possible partial O&M migration to construction in years to come, etc? Of all assets, the most valuable one, brain asset, is not in the NAV. Haha.
If Kepland drop 10% further, surely I will grab as much as I can afford. Just my FA views from different prospective.

Casey.

AK71 said...

Hi Casey,

Thanks for sharing. Much appreciated. :)

On my FB wall, another reader also pointed out that Keppel Land's NAV is higher now. My information from their November 2014 presentation is outdated. What a difference 3 months make. -.-"

As for the use of debt, I do agree that a judicious amount of debt could improve performance and it is obvious that you have been tracking Keppel Land's performance closely. :)

In the last few years, any individual who has had a leveraged position in real estate in Singapore would have done extremely well. This shows what the right use of debt at the right time can do.

We want to remember that there could be bumps along the way as seen in the huge drop in Keppel Land's NAV during the GFC. They took 3 years to recover that loss in valuation. So, it could be prudent to be more cautious in the current environment as results could come in weaker.

Finally, I agree that a significant drop in Keppel Corporation's share price such as a 10% decline would make it a compelling buy. :)

boonchin.ng said...

"Finally, I agree that a significant drop in Keppel Corporation's share price such as a 10% decline would make it a compelling buy."

Hmm, so KepCorp around 7.2 is a good price to nibble ;)

Casey said...

Hi Ak,

Huge drop in NAV of Kepland during GFC? Are you referring to NAV per share resulted from right issue in 2009?

Casey

AK71 said...

Hi Casey,

Yes, in 2009, they had to do an equity fund raising. 9 rights shares for 10 shares held. That diluted the NAV/share heavily.

I should have said NAV/share instead of NAV. A thousand apologies. -.-"

Casey said...

Hi Ak

I was the share holder of keppeland at that time. The fund raising was for good purpose, it was not the case that they have credit issue, they could choose not to have fund raising at that time. If they chose not to have right issue, we would not have a chance to have a whopping 150% return in 2 years.

Cheers.

Casey.

AK71 said...

Hi Casey,

It is obvious to me that you have been tracking the performance of Keppel Land. So, you most probably know this company's history better than I do. Thanks for sharing what you know with me. :)

AK71 said...

Operating profit was 24 per cent higher at S$232 million, mainly due to higher rig building and fixed platform segment earnings, but net profit fell as the year-ago period included a write-back of tax mainly attributable to the recognition of tax incentives.

For the 12 months ended December 2014, net profit rose 1 per cent to S$560 million.

Looking ahead, Sembcorp Marine said major oil and gas companies have reduced capital expenditure and deferred some of their planned projects due to the steep decline in oil prices in the second half of 2014.

Sembcorp Marine said it plans to pay a final dividend of 8 cents per share, bringing the total dividend for 2014 to 13 cents, unchanged from 2013.

Source:
http://www.channelnewsasia.com/news/business/singapore/sembcorp-marine-posts-5/1654608.html

Xw said...

Hi AK, technical formation still intact?? Vested in sci...

AK71 said...

Hi Xw,

For SCI's recovery to be sustainable, I would like to see the share price not going lower than $4.15 or, maybe, $4.14. This is where the support should be.

If share price should go lower, then, I want to see that the momentum oscillators are higher before adding more.

Xw said...

Thanks AK. Guess ta wld also be an useful indicator to know when can enter a stock

boonchin.ng said...

Hi AK,

Did an "agaration" for SCI. ~19cts EPS from Marine. Utilities and Urban Decelopment should get ~24.5cts EPS. Full year EPS of 43.5cts looks very achievable ;)

AK71 said...

Hi boonchin,

My estimates were a bit more conservative at 40c. Anything more is a bonus. Based on my more conservative estimate, I believe that if the share price should test $4.00, I would be taking a gobble at the stock. ;p

AK71 said...

Sembcorp Marine

On 18 February 2015, a share buy-back resolution was passed for Sembcorp Marine. Between 16 and 20 February, Sembcorp Marine repurchased a total number of 626,300 shares with a total consideration of S$1,893,702.79.

The maximum number of shares authorized for the buy-back transaction was 208,932,201. As of end of last week, by way of acquisition, Sembcorp Marine had purchased a cumulative amount of 1,026,300 shares under the 18 February resolution. This represented 0.05% of the company’s issued shares (excluding treasury shares) as at the date of the share buy-back resolution.

As of 18 February 2015, the number of issued shares excluding treasury shares stood at 2,088,726,094 and the number of treasury shares held after purchase stood at 1,034,013.

Ray said...

Hi AK,

Any thoughts about the SGM notice from SembCorp yesterday?
Share price plummeted today.

AK71 said...

Hi Ray,

No idea why the share price dropped. I thought it was good news. Hmmm...

"Mr Wong Weng Sun, President and CEO of Sembcorp Marine, said: “We are very pleased that Heerema has chosen Sembcorp Marine as their strategic partner to build the new semi-submersible crane vessel. With our proven track record in building a broad range of semi-submersible vessels for drilling, well-intervention and accommodation purposes, we are confident of building the best vessel to meet Heerema’s exacting requirements.”

"The LOI is not expected to have any material impact on the net tangible assets and earnings per share of Sembcorp Marine for the year ending December 31, 2015."

Ray said...

I read it and couldn't sense anything negative either.
I thought I missed something. :)

Cheers.

boonchin.ng said...

There were 2 statements from SMM yesterday, 6.30AM and 6.30PM.

The morning statement was that positive:

STATEMENT BY SEMBCORP MARINE LTD
By the Company’s announcements of 6 February 2012, 8 August 2012 and 29 November 2012, the Company announced that the Company’s subsidiaries had secured a number of drill rig construction contracts (the “Contracts”) with subsidiaries of Sete Brazil, a company in which Petrobras has an interest.
By the Company’s announcement of 8 February 2015, the Company, among other things, referred to various media reports which reported statements made by Petrobras’ former engineering manager Mr Pedro Jose Barusco. Those reports reported, among other things, that Mr Barusco had made statements to the effect that illegal payments had been made in connection with contracts entered into by Petrobras and/or Sete Brasil.
The Company had earlier initiated an internal investigation and engaged lawyers for the purposes of obtaining legal advice.
The Company has received a copy of what is said to be a plea bargain between the Brazilian authorities and Mr Barusco in which Barusco makes allegations against one Guilherme Esteves de Jesus (“GDJ”) in connection with the Contracts. GDJ is connected to companies which were engaged by these subsidiaries as consultants in connection with the Contracts.
The Company learnt on 28 March 2015 that arising from allegations made by Barusco, GDJ was arrested by the Brazilian authorities on 27 March 2015.
The Company is unable to comment on the truth or otherwise of these allegations and its internal (legally privileged) investigations are continuing.
The Company and the Group have a strict anti-bribery policy and do not condone any action that will result in the violation of any country’s anti-corruption laws. The Company and the Group also do not and will not tolerate any improper business conduct

AK71 said...

Hi boonchin,

Ah, this probably explains the price action today. I missed this. -.-"

Ray said...

sounds bad.... :(
hefty fine?
contract voided?
:-O

AK71 said...

Hi Ray,

Your guess is as good as mine really. Will have to wait and see. -.-"

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