Will Sembcorp Marine get privatised as headwinds mount?

It’s a possibility, analysts say.

There is a likelihood that Sembcorp Marine might get privatised as it faces the worst oil price downturn in its history, according to a report by Maybank Kim Eng.

Maybank Kim Eng hazards that if conditions deteriorate further, SMM may require additional funding to sustain its operations. If this materializes, then its parent firm Sembcorp Industries or even Temasek Holdings might step in to salvage the rigbuilder.

The report cited three reasons that could back such a move. First, instead of injecting capital into SMM through a rights issue, privatisation allows SCI to take full-control, and allocate capital more efficiently.

Secondly, SCI could use its balance sheet to support SMM’s working capital needs and finance construction activities until the industry turns around for SMM to monetise the asset.

The importance of rigbuilding to Singapore’s economy might also fuel privatisation.

“SCI’s majority shareholder Temasek Holdings may have strong longterm strategic plans for the company. A Temasek-led privatisation will also relieve SCI of the additional strain that it may have to carry if it were to undertake the privatisation,” said the report.