SembMarine caught in maelstrom as $120m investment in Cosco capsizes

Shares are now suspended pending restructuring in China.

The shipping company had high hopes for its $120m investment in Cosco Corporation, but optimism has all but gone down the drain as the deal goes completely sour.

According to RHB Research, SembMarine took a $17m writedown on its holding value to the last traded price.

But don’t be quick to blame the blunder on SembMarine, as a large part of the associates’ loss is due to Cosco, which just issued a profit warning.

“There were associate losses of S$24m (largely from Cosco) and S$17m impairment charge for mark-to-market adjustment of its stake in Cosco Corp,” DBS said.

“These were partially mitigated by tax credits of S$10m in the quarter. Net gearing rose from 0.5x as of end Jun to 0.6x, a result of rising working capital needs to fund rig building and capex deployed for the Tuas and Brazil yards,” DBS added.

Meanwhile, RHB research is alarmed at SembMarine’s lack of a clear guidance.

“What worries us most, however, was neither margins nor underperforming associates but the company’s apparent reluctance to provide clearer guidance in its announcement and in the conference call. The usual presentation slides were also omitted,” RHB said.