Seatrium Limited (formerly SembCorp Marine and KOM)

[tikam tikam]

Sorry I may be only good at conceptual - even then... - if I were to hazard a guess, at the price of Malaysian foreign worker minus overburdensome tax, in the appropriate year SMM started really running fast (that others could not catch) ...

[Temperament]

Ah... Malaysian foreign workers really help Singapore a lot. Now it's even better - SING 1$ to & $3.07 MYR@ today's rate. Yes SMM still can compete with the world.

[weijian]

Maybe no chance for rights issue if SETTE BRAZIL declares bankruptcy first.
All the SMM's top brains must be thinking of that already.
If SETTE BRAZIL declares bankruptcy, wonder how low SMM price will drop?
Or Market has already priced that in?
Is it any wonders, when WB said, "If you wait for the robins, spring will be over".
But do you dare to buy now?
Me, i don't know how to calculate leh!
So how to buy?
Anyone want to calculate and show?
Thanks

I think markets have not priced in fully such a possibility.

From behavioral finance standpoint, humans are more optimistic than pessimistic (or else, how would we have survived any rebuild after WW2 or put a man on the moon?). Because of this, I do observe that Mr Market tends to be biased towards optimism than pessimism - This implies, under normal circumstances, there is an inherent 'denial' of pending bad news (that hasn't been announced), resulting in underpricing of such risks, while overpricing good news (the optimism bias in us triggers an over-reaction, and when expectations get exceeded each and every time, we start to buy the story that trees DO grow into the sky)

[Bibi]

Maybe no chance for rights issue if SETTE BRAZIL declares bankruptcy first.
All the SMM's top brains must be thinking of that already.
If SETTE BRAZIL declares bankruptcy, wonder how low SMM price will drop?
Or Market has already priced that in?
Is it any wonders, when WB said, "If you wait for the robins, spring will be over".
But do you dare to buy now?
Me, i don't know how to calculate leh!
So how to buy?
Anyone want to calculate and show?
Thanks

I think markets have not priced in fully such a possibility.

From behavioral finance standpoint, humans are more optimistic than pessimistic (or else, how would we have survived any rebuild after WW2 or put a man on the moon?). Because of this, I do observe that Mr Market tends to be biased towards optimism than pessimism - This implies, under normal circumstances, there is an inherent 'denial' of pending bad news (that hasn't been announced), resulting in underpricing of such risks, while overpricing good news (the optimism bias in us triggers an over-reaction, and when expectations get exceeded each and every time, we start to buy the story that trees DO grow into the sky)

I thought the market has more or less priced in such possibility. If we use the last GFC as a gauge, its PB is ~1.35. Now its PB is 0.91. Of course, analyst are now comparing SCM with Korean yards co where they say are trading at 0.55 to 0.70 PB. And they conclude SCM still has room to fall. So depending on yr risk appetite, no one can catch the bottom. One might like to accumulate but be prepared for cash calls. 

Not vested in SCM. Gosh, now than I realize SCM PB is higher than SembCorp and KepCorp.

[weijian]

hi Bibi,
Thanks for your replies. It would be interesting to try to empirically prove both our statements, but I don't think there is a real un-biased way to find the true value. Hindsight will soon do anyways. SCM started out as a relatively asset light company (at least it used to be, before all the working capital came to be tied up to their customer's orders) and the previous price to book premium given by Mr Market could be explained by its intangible assets like reputation/IP etc...If the PB is 0.91, there is either (1) negligible intangible asset valuation left by Mr Market and/or (2) its encumbrances are going to gobble it up. 3Q15 financials shows ~2.7bil of payables/current loans with only 826mil of cash + 3.4bil inventories/work in progress. If SCM suffers an impairment in the inventories/work in progress (read:Sete Brasil), it will need its parent's support.

SCM doesn't have a habit of publishing customer deliveries. It now has to :http://infopub.sgx.com/FileOpen/SCMPressRelease18Jan2016.ashx?App=Announcement&FileID=386200 (Tallying initial order's press release vs actual delivery date, there is ~1year delay for this full delivery)




but for SembCorp and KepCorp

[Art or Science]

SCI to get control or inject funds. Merger with Keppel also on the cards.

Still looks rather bleak with the impairments against recognised revenue and inventory, not to mention the oil prices. Wonder why the run up today..

http://www.straitstimes.com/business/sem...ne-sources

[BlueKelah]

No need to wonder, just market rally today, rising tide floats all the boats

Sent from my MotoG3 using Tapatalk

[grubb]

Market is probably overestimating the impact of Sete Brasil's bankruptcy. Out of the 7 drillships that SMM has signed with Sete Brasil, 4 are being built and 3 have not started. SMM has already collected significant progress payments from Sete Brasil, so any writedown will not be as disastrous as market thinks.

Since the drillships are originally meant to be chartered to Petrobas, and since Petrobas owns about 10% (IIRC) of Sete Brasil, will Petrobas walk away from the charter if Sete Brasil declares bankruptcy? I read that the drillships were ordered to spec, i.e. to suit Brazilian waters and regulation. Petrobas can either walk away and charter in the market now at lower prices and get fined by regulators, or honour the existing contracts. With current oil prices, who knows.

Working capital will still be stressed, and theres the problem of new jobs for the Brazilian yard. Don't get me wrong, if Sete Brasil files for bankruptcy, market will sell down SMM. But at least I don't think SMM will go belly up, or require additional capital, yet.

[Art or Science]

Suppose that SM had already recognised 2.5b for the 4 drillships - the impairments would still be quite a lot, given SM net debt situation and with ard 2b loan

The brazilian ship yard, which IIRC cost ard $800m, was probably built with drillships and rigs for brazil and probably other American countries in mind. And with brazil economy now in the doldrums and the ongoing corruption saga, jobs would be hard to come by.

[Clement]

The recovery was probably due to the new decree to assist the oil and gas supply chain industries just passed by the Brazilian government yesterday.

Here is a news article on it. (Originally in Portuguese.)

https://translate.googleusercontent.com/...cWqI6rAUdw