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So many questions unanswered, think it is best to stay away from this counter till the picture is clearer.

 

 

KIM ENG - Questions Still Unanswered

♦ For the record ? an 82% rise in 3Q07 net profit

SembCorp Marine?s (SMM) 3Q07 results announcement was overshadowed by analysts and journalists seeking clarification for the announced forex losses from unauthorized transactions. For the record, however, SMM reported 3Q07 net profit of S$81.4m, up 82% from 3Q06 but down 5% sequentially. This dip is within expectations, due to differing profit recognition cycles of various projects. YTD net earnings of S$240.2m also puts SMM?s earnings trajectory in line with our full-year forecast of S$335.6m. Actual shipyard operations continue to be unaffected by the forex loss issue, and, according to SMM, no customers were having second thoughts about their orders, nor has the level of enquiries abated.

♦ But the focus was clearly on the forex losses

With regards to the unauthorized forex losses, SMM has stated that it has now closed its open positions on the transactions with 11 different banks. The current loss stands at US$220m, which is higher than the marked-to-market loss announced earlier of US$165m. This is due to further currency movements since the announcement. The last of the outstanding transactions could only be closed at around 3am the preceding morning. Again, this is in addition to an earlier related forex loss of US$83mwhich was already paid to one of the banks before the transactions were discovered. However, based on its preliminary investigations,SMM has stated its position that the transactions are not valid and binding, and that it is therefore not liable for the loss. As such, it is not making any provisions for any liability in its accounts. As for the US$83m already paid out, the paid-out cash position will be offset by an entry into receivables in the balance sheet, with nothing taken to the profit and loss.

♦ We still advocate caution on this potential overhang

SMM must be reasonably confident of its own standing for it to state categorically that it is not liable for the losses even as investigations and potential litigation are being carried out. However, we believe that in the interest of prudence, we would continue to look upon the potential total liability of around S$440m as an overhang. SMM would not commit to or comment on any potential timeline to its investigations or a possible resolution of the matter. Realistically, however, the issue may drag on for several months or even years. We would also point out that the current potential liability of around S$440m may be inflated substantiallyby legal and administrative fees, as well as interest costs.

♦ Maintain HOLD, TP at S$4.80

We are keeping our forecasts for FY07 unchanged, as mainstream operations are unaffected by the forex loss situation. We are also retaining our sum-of-the-parts valuation of S$4.80/share and our HOLD recommendation. Sentiment on the stock may improve in the wake of SMM clarifying its position somewhat; we will, however, advocate caution. SMM?s management has not yet been able to clarify how its risk controls apparently were unable to prevent this situation from occurring. We will continue to monitor developments.

 

CIMB - Sembcorp Marine (S$4.58) - 3QFY07 results - Overshadowed by forex fiasco

SembMarine?s 3Q07 core net profit of S$82m is 7% below our estimate and 6% below consensus due to lower-than-expected margins. All unauthorised forex positions have been closed with total losses of US$303m, including US$83m paid to a bank. No provisions were made as SembMarine plans to contest the transactions. We believe SembMarine is likely to divest its remaining 4.98% stake in Cosco Corp (S) to mitigate the losses should its contests fail. We are raising our earnings estimate for FY07 by 169% to reverse our previous provision of S$142m made for the forex losses. We have also upgraded our estimates for FY08-09 by 5-10% to reflect a shift in order-book recognition and higher associate contributions. Our target price climbs to S$5.00 from S$4.70 following our upgrade, still based on blended DCF, P/E and DDM valuations. Upgrade from Trading Sell to Outperform.

 

OCBC - SembCorp Marine Ltd: Is it Solitaire once more?

Results mirrored previous quarter. SembCorp Marine (SMM) reported 11.4% QoQ rise in revenue to S$1.17b in 3Q07, with growth mainly from the rig building, offshore and conversion and repair businesses. SMM's net profit decreased slightly at 4.3% QoQ to S$81.4m, due to the one-off dividend interest income received from Cosco Corporation (Singapore) in 2Q07.

Forex loss of US$303m. SMM disclosed that the outstanding forex position has been closed out as of 1 Nov, and the total potential realized loss is US$303m (of which US$83m had been paid). However, no other details were disclosed as management cited the current ongoing investigations.

History repeating itself? SMM is presently disputing liability to this US$303.0m (S$438.7m) loss, and will not recognize this loss. This brings back to mind the protracted Solitaire saga in 1993, where SembCorp Industries provided S$150m in 1998, and another S$415m in 2004. This uncertainty is likely to affect sentiment for the stock.

Hedging procedures in future. Going forward, management assured that only net exposure would be hedged using forward exchange contracts and swaps, such that the differential loss or gain in the spot market would be partially offset by the hedging instruments. This would then be markedto- market on a periodic basis to monitor its exposure and trades done.

Strong order book and good fundamentals. Since the start of the year, SMM has won S$5.1b worth of new offshore and rig newbuild orders. This brings the total order book to-date to S$7.9b. Fundamentals for this industry remain positive, with earnings visibility stretching till 2010. Furthermore, with yard expansions in India and Brazil, outlook for the offshore market remains favourable.

Sentiment towards the stock likely to stay cautious. We have revised up our earnings estimates in FY07-08 to reflect the gains on disposal of Cosco shares and stronger net order book. We are now projecting net profits of S$504.5m in FY07 and S$449.0m in FY08 versus our previous estimate of S$310.6m and S$405.2m. Buoyed by the strong fundamentals of the offshore market, our fair value estimate for SMM is revised up to S$4.95, using a similar 22.5x FY08 PER. However, in view of the uncertainty over the on-going potentially long legal saga and potential forex transaction losses, we have downgraded our rating to a HOLD.

 

Looks at the 3Q results, its impressive! Maybe they are good in Sales but poor in marketing and PR. They need to learn how to sa-ka the reporters.

 

 

Singapore's SembMarine to hold briefing after FX loss



SembCorp Marine will hold a press briefing on Thursday to discuss its financial results after the Singapore rig-maker revealed shock foreign exchange losses in hundreds of millions of dollars last week.

The company, the world's second-largest builder of offshore rigs, is due to announce its third-quarter results after the market close at 5 p.m. (0900 GMT) on Thursday and the briefing by company management is scheduled to begin at 5.30 p.m.

SembMarine said last week that its former finance chief undertook "unauthorised" foreign exchange transactions that could lead to an unrealised loss of $165 million.

 

SembMarine rise on upbeat broker note



Shares of SembCorp Marine rose as much as 4.1 percent to S$4.62 with 7.9 million shares traded after Morgan Stanley said that the firm's foreign exchange losses in the hundreds of millions of dollars were a one-off.

"Though we remain concerned about the slack in financial control, we are optimistic that the situation is contained and there is no more fallout," said Morgan Stanley analyst Praveen Choudhary.

Morgan Stanley has raised its recommendation for SembCorp Marine to "overweight" from "equal-weight" and increased the stock's target price to S$5.40 from S$3.43, citing demand for deepwater drillers and production units. [ID:nSGC001335] 0145 GMT- Straits Times Index <.STI> up 0.78 percent.

NEPTUNE ORIENT LINES UP ON STRONG EARNINGS Shares of Neptune Orient Lines rose as much as 4.9 percent to S$5.35 with 1.6 million shares traded after the firm posted a 50 percent gain in third-quarter net profit.

NOL, which owns APL, the world's eighth-largest container shipping company, said on Wednesday that its earnings for the three months to September rose to $191 million from $127 million a year earlier and sales rose 15 percent to $2.03 billion during the period. [ID:nSIN3757] Morgan Stanley raised its investment recommendation for shares in NOL to "overweight" from "equal-weight" and increased the stock's target price to S$6.30 from S$5.65 citing attractive valuations in the light of a good outlook for container shipping.

"NOL's valuation looks compelling at current price, given our positive outlook on the container shipping industry, as we believe that global demand remains strong despite U.S. demand slowing," Morgan Stanley analyst Sophie Loh. [ID:nSGC001334] 0122 GMT- Straits Times Index <.STI> up 0.71 percent.

COSCO CORP RISES ON RESULTS, OUTLOOK Shares of Cosco Corp rose as much as 4.5 percent to S$8.10 with 2.7 million shares traded after the Chinese shipbuilding and repair firm posted a 37 percent gain in third-quarter profit. [ID:nSIN691] The firm said an excellent shipbuilding industry was set to drive the firm's growth this year and further ahead.

Morgan Stanley and Merrill Lynch raised their price targets for Cosco to S$9.00 from S$6.00 and to S$10.10 from S$9.15, respectively. [ID:nSGC001336] Cosco also said it was not exposed to foreign exchange bets because it conducted all its business in U.S. dollars.

The statement comes after Sembcorp Marine and Labroy Marine disclosed in the past week losses in the hundreds of millions of dollars on foreign exchange bets that went wrong.

 

RESEARCH ALERT-Morgan Stanley raises SembMarine to "overweight"



Morgan Stanley has raised its recommendation for shares of SembCorp Marine to "overweight" from "equal-weight" and increased the stock's target price to S$5.40 from S$3.43, citing demand for deepwater drillers and production units.

Morgan Stanley said in a client note that it has revised upwards its forecast earnings for the firm by 40 percent on higher contract expectation.

"We believe that SMM has also expanded capacity to take on more offshore jobs in the future," said Morgan Stanley analyst Praveen Choudhary.

 

Pipavav is building 85 hectare shipyard, has secured orders worth US$1b

This will be its first investment in India, one of the world's fastest growing economies, and is seen as an investment in the country's future.

SembCorp Marine, which was in the news recently over a scandal involving its finance head and which could lead to huge foreign-exchange losses, said yesterday that it has signed an investment agreement with Pipavav Shipyard Ltd (PSL) and its promoters, SKIL Infrastructure Ltd, to subscribe for 17.5 million shares in PSL at 45 rupees apiece.

Explaining the rationale for the purchase, SembMarine's senior vice-president of corporate development Ng Thiam Poh said: 'Semb- Corp Marine was invited by SKIL to be its strategic partner and subsequently entered into a technical assistance agreement with PSL. SembCorp Marine's role includes advising on the design of the shipyard, its layout and infrastructure, setting up of the management and technical systems and to provide training to PSL.'

'With this investment, SembCorp Marine would be able to establish other business ventures in close collaboration with our Indian partners and to grow our marine and offshore business in India,' added Mr Ng.

Located within the vicinity of Pipavav Port, Gujarat in India, PSL is strategically located on the west coast of India along the Middle East-Singapore sea route.

The 85-hectare shipyard is poised to be one of the largest shipbuilding yards in India.

The shipyard to-date has secured contracts worth a total of US$1 billion for the construction of 22 panamax-sized ships with options for an additional four vessels.

Currently, the shipyard infrastructure is under development and construction and is scheduled for completion in September 2008.

This comprised a 600-metre long VLCC drydock equipped with shipbuilding workshop facilities and equipment.

The shipyard infrastructure is geared towards the building of large vessels up to VLCC size in the future.

Business Times 30th Oct 07

 

SEMBCORP Marine, the world's second largest builder of offshore oil rigs, is buying a 3.31 per cent stake in an Indian shipyard for $29.12 million.

 

 

fairygal, free lesson for u... 1=one, gt= got, tat= that, prob = problem, nid= need...

wil to correct if translated wrongly

 

Wilfred,

 

It will be great if you can try not use sms language here.  For those who are not so proficient in sms language, it is really difficult to understand instantly what you are trying to say.  Appreciate.

 

any1 gt semb marine tat 2 bonus lots? I gt tat but encountered some prob.. it does not show tat i have this in my online portfolio but i heard frm my broker tat it is not shown only but the fact is 1 have them. So i sold them the other day but now nt only i did not receive the money, it showed tat I have shot the counter instead showing tat i have sold but not yet buy back.. why is it like tat can any1 advice? Is it tat i nid to do something different from normal if i nid to sell these 2 lots?

 

Sembcorp Marine, the world's second largest builder of offshore oil rigs, is buying a 3.31% stake in an Indian shipyard for $29.12 million. This will be its first investment in India, one of the world's fastest growing economies, and is seen as an investment in the country's future. SembCorp Marine, which was in the news recently over a scandal involving its finance head and which could lead to huge foreign-exchange losses, said yesterday that it has signed an investment agreement with Pipavav Shipyard Ltd (PSL) and its promoters, SKIL Infrastructure Ltd, to subscribe for 17.5 million shares in PSL at 45 rupees apiece. Explaining the rationale for the purchase, SembMarine's senior vicepresident of corporate development Ng Thiam Poh said: 'Semb- Corp Marine was invited by SKIL to be its strategic partner and subsequently entered into a technical assistance agreement with PSL. SembCorp Marine's role includes advising on the design of the shipyard, its layout and infrastructure, setting up of the management and technical systems and to provide training to PSL.'

 

If my memory is correct, the sembcorp group of companies always incurred huge losses once every few years. Perhaps corporate governance needs further tightening.

 

Here's the post from Musicwhiz regarding the SM Saga:The SembCorp Marine Saga

Hot on the heels of the Uni-Asia fiasco is yet another scandal which makes Uni-Asia?s case pale in comparison. The company in question this time is SembCorp Marine (Sembmarine or SM) and they had revealed on October 22, 2007 that their finance director, Mr. Wee Sing Guan, had engaged in unauthorized foreign exchange (forex) transactions and caused the company to lose an amount to the tune of about US$248 million. The amount includes US$83 million which was already paid to a bank through Jurong Shipyard Pte Ltd (JSPL), while the remaining amount is still subject to confirmation as the positions are still ?open?, meaning that the losses have not been realized yet. SM has said that it will engage a special audit from Ernst and Young and also lawyers from Drew and Napier to see if it can contain the losses and to assess the extent of the damage. The announcement by SM that it had sold 39 million shares in Cosco Corp for S$272.2 million is widely seen as a move to stem the losses, and is regarded as a form of "damage control".

Consider the numbers involved here and it will be readily apparent to the average observer that US$248 million is a huge sum, as their FY 2006 net profit amounted to S$238.4 million (yes, it?s SGD, not USD !). This means that if taken in context, it would mean that the unrealized losses in question already more than wipes out FY 2006?s profit, and leave extra losses to boot. Assuming that SM?s profit for FY 2007 grows 50% (just an assumption), it would amount to S$357.6 million, which is still lower than the S$362.8 million loss (using an exchange of 1 USD: 1.463 SGD) from the illicit forex transactions. Of course, such a shocking revelation from the world?s second largest oil rig builder sent its share price reeling and it closed 86 cents (15.4%) down to S$4.74 on the release of the trading halt. A full S$1.8 billion worth of market capitalization evaporated in a single trading day, and this is testament to the magnitude of the damaging announcement made by the company.

Several issues arise as a result of this stunning news, which have also been discussed on ST and BT as well as online share forums. Still, it pays to revisit these issues to discuss what went wrong, the implications on corporate governance and whether confidence can (ever) be restored to this blue chip company. Firstly, the glaring issue of corporate governance comes into play again, and one would have thought that after the likes of CAO, ACCS (now MDR), Citiraya (now Centillion) and Informatics, the entire corporate world would have been more guarded about possible fraud or unauthorized risk exposures. SM must delve deep into the reasons for this lapse of internal controls, resulting in one of the most damaging losses since the CAO back in 2003. Considering that it is a company which prides itself of risk management (as disclosed in its Annual Report) and which recently won an award for transparency given out by SIAS, this latest piece of news seems all the more ironic. All I can say is that SM?s directors and top management have to get their act together to ensure that loopholes are plugged, and to carry out a thorough investigation into how such transactions could have been entered into without their knowledge or authorization.

Another issue at hand is also the question of how the losses became so massive. According to SM, they do normal hedging against possible adverse currency fluctuations, such as entering into forward contracts to ?lock in? a favourable exchange rate (they earn in USD but report their financials in SGD). However, it was pointed out by analysts that a loss of this magnitude could only be perpetuated by risky forex speculation, by making heavy bets in the billions (probably) on the direction of exchange rates. As the greenback has depreciated only about 7% against the Singapore dollar in recent months, this has led to even more speculation of how these losses came about. SM needs to clearly explain itself after the inquiry and give full and honest disclosure on the entire debacle. If not, then it will be a classic case of a ?crisis of confidence?, which will be very difficult to recover in future. As Warren Buffett has said: ?You take a lifetime to build a good reputation and only five minutes to lose it all.?

A final note to add for this post and something I wish to highlight yet again are the inherent risks in investing in quoted equities. Even a value investor who had purchased SM based on fundamentals and growth prospects could not have seen this coming. It is one of those anomalies which can hit a diligent investor and cause him to lose a substantial amount of capital, akin to an ?Act of God? incident which can cause freakish damage. After all, how is one supposed to even fathom the possibility of a blue-chip Temasek-linked company being embroiled in a scandal of this scale ? It all boils down to whether an investor had made adequate provision for losses stemming from ?unforeseen events? such as these, and whether he has adequately hedged his own exposure by diversifying his investment types (e.g. in gold, commodities, real estate). By investing in equities, all of us have to take up a proportionate amount of risk and it is this risk which we manage every single day as we entrust our monies in the hands of the Management of the companies which we invest in.

Note: I will post more updates and opinions on the SM saga as events unfold and more information becomes available.

 

pinnacle, oops my apologies, wrong person, it was 787180 who posted...pai seh...

 

teresa. That's not me.
I did not touch uni-asia at all.
And that post on shorting, you need CFD account to do that.
Normal trading account, you must cover back within the same say.
Else you will be fined by CDP.

 

wow if drag to 3plus, then must short at 4plus..pinnacle any advise on price to short? read that u shorted on uni-asia and close when its almost dry...now laughing all the way to bank... u think this counter got chance or not? i missed uni-asia...

 

Sorry to say this, but based on current PE of 20over, it might go to 3plus due to this scandal...

 

teresa. That was the target then to buy quick sell quick for quick profit.
Now strategy change.
I prefer to wait and see first.
But if price reaches $4.30, may consider to load for long term.