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Insider Trading
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Pinnacle
Master |
23-Oct-2007 10:16
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UOB KH - Take profit: SMM potential foreign exchange losses of US$151.3m SembCorp Industries? (SCI) has announced that the Group Finance Director of its 61% owned subsidiary, SembCorp Marine (SMM) Mr Wee Sing Guan had entered into various unauthorised foreign exchange transactions for the account of SMM?s 100% owned Jurong Shipyard Pte Ltd (JSPL) and misled JSPL and SMM in relations to the unauthorised transactions. Mr. Wee has been relieved of his duties at the SMM Group and has resigned his directorships in the subsidiaries of SMM, including JSPL. (for more info refer to pg X) Losses estimated in the region of US$151.3m. Based on market mark-tomarket information provided to SMM on the foreign exchange transactions from the various banks (each of which has provided information as of different dates) and based on the information, the estimated unrealised loss to JSPL arising from the foreign exchange transactions is in the region of US$165m if the transactions are valid. This does not include the sum of approximately US$83m which JSPL paid to one of the banks before the unauthorised transactions were discovered. Given, that SCI has a 61% stake in SMM, this could translate into US$151.3m in losses. S$140.3m gain on sale of 39m ordinary shares in COSCO Corporation SMM has sold 39m ordinary shares in COSCO Corporation Singapore (COS(S)). On completion of the sale, SMM still holds 111.4m COS (S) shares which represent 4.98% of the share capital of COS (S). The sale will result in a gain of approximately S$140.3m for SCI and will be treated as a one-off gain in FY07. Take profit: Target price and recommendation under review. Based on the current news, we advise investors to take profit on SCI. Our target price and recommendation are under review. |
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nickyng
Supreme |
23-Oct-2007 10:16
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hee...IN 3x$4.64...OUT 3x$4.84 !!! cheers !!! too tempted to contra then SHORT !! :P |
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Pinnacle
Master |
23-Oct-2007 10:10
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But have not reached my buy price yet. 
Singapore's SembCorp Marine down 16 pct after forex losses Shares of SembCorp Marine SembCorp Industries The alleged transactions could result in an unrealised forex loss of $165 million to SembCorp Marine unit Jurong Shipyard Pte Ltd, the company said. For details: [ID:nSP240114]. "We believe SembCorp Marine remains strong operationally," Morgan Stanley analyst Praveen K. Choudhary said in a note. "However, the recent revelation of unauthorised foreign exchange transaction could dent investor confidence and result in stock de-rating in our view," he said. In a separate statement, SembCorp Marine said it had sold part of its shareholding in shipbuilder Cosco Corp (Singapore) [ID:nSIN63057] Goldman Sachs analyst David Ng said in a client note that the disposal of Cosco shares should partly offset SembCorp Marine's potential forex losses. |
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Pinnacle
Master |
23-Oct-2007 10:03
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KIM ENG - All the Good Work Undone �� Unauthorised forex trading losses of some S$370m SembCorp Marine (SMM) has announced that its group finance director entered into various unauthorised foreign exchange transactions for subsidiary Jurong Shipyard. As a result of these transactions, the marked-to-market information on the foreign exchange transactions from the various banks indicates an unrealised loss from the transactions of around US$165m, if the transactions are valid. This also does not include an earlier and related forex loss of US$83m which was paid to one of the banks before the transactions were discovered. The extent of the impact of these unauthorized transactions on FY2007 accounts will depend on the movements of the exchange rates, the outcome of the investigations and disputes, if any. Presently, the total marked-to-market losses will amount to around S$370m. This figure actually exceeds our net profit forecast of S$335.6m for FY07. However, SMM does not expect that this will have any impact on JSPL?s operations. Mr Wee has been relieved of his duties and has resigned his directorships. �� Where were the risk controls? Trading in the shares of SMM and parent SembCorp Industries were suspended pending yesterday?s announcement, but will resume today. SMM has appointed Drew & Napier LLC and Ernst & Young to investigate the issue, and has convened a special committee within SMM. The committee comprises various board members, namely Mr Tan Tew Han, Chairman of the Audit Committee; Mr Ajaib Haridass, Chairman of the Risk Committee; Mr Ron Foo Siang Guan, member of the Audit and Risk Committees; and Mr Tang Kin Fei, CEO of SCI. However, what was surprising was the apparent lack of internal controls that led to such a situation to begin with. We feel that any failure in risk control is rather disappointing, given the group?s previous experience with the long-running Solitaire dispute which eventually led to a settlement of some S$690m. �� Raises cash from Cosco sale In the wake of this debacle, SMM has raised cash by selling 39m ordinary shares in Cosco Corporation for $272.2m, and will result in a gain of approximately $230m. SMM still holds 111.4m Cosco shares which represent 4.98% of the share capital of Cosco, which is valued at S$835.5m at current market prices. The sale will be taken as a one-off gain in the current financial year?s books. �� Downgrade to HOLD, TP revised down to S$4.80 We are keeping our forecasts for FY07 unchanged at this time, pending the outcome of SMM?s investigations into the matter. However, the overhang of some S$372m worth of losses is very real, and SMM will book some S$230m into its books as an extraordinary gain. Under this scenario, our sum-of-theparts valuation for SMM is S$4.80/share and we are downgrading the stock to a HOLD. Furthermore, the negative sentiment on this announcement is likely to place selling pressure on the stock for the near term. |
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Pinnacle
Master |
23-Oct-2007 09:38
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CIMB - SembCorp Marine (S$5.60) - Expect knee jerk sell down but worth picking up later SembMarine announced that its Director of Group Finance, Mr Wee Sing Guan, had entered into various unauthorised foreign-exchange transactions for Jurong Shipyard Pte Ltd (JSPL) and misled JSPL and SembMarine in relation to these transactions. Wee has been removed from his position and all directorships within the group with immediate effect. Wee has been with SembMarine for 33 years and was the previous CFO from 2000 to 2006 before his promotion to Finance Director. Drew and Napier LLC and Ernst & Young have been appointed to investigate the matter. Comments Worst case of US$248m. SembMarine has received marked-to-market valuation for the forex transactions from various banks and estimated unrealised losses of US$165m for JSPL. This excludes a sum of US$83m which JSPL paid to one of the banks before the unauthorised transactions were uncovered. Sold Cosco shares for gain of S$230m to cushion potential loss. Separately, SembMarine announced it has successfully placed out 39m shares in Cosco Corporation (Singapore) at S$6.98 per share (7% discount to market value of S$7.50), raising S$272.2m with a one-off gain of S$230m, Upon completion of the sale, SembMarine will still hold 4.98% (from 6.8%) or 111,400,000 Cosco shares. Our simplistic calculations accounting for potential forex losses and gains from the Cosco share sale (excluding legal costs associated with the potential lawsuits) show a net dent of S$142m on SembMarine?s profit before tax for this year. Losses contained to JSPL; order-book execution on track. Management confirms that JSPL is the only yard affected but that JSPL?s operations have not been hurt. SembMarine has four other yards in Singapore, namely PPL, SML, JSML and SOME. Valuation and recommendation Cutting earnings by 3-36% for FY07-09. We believe SembMarine is likely to make partial provisions in its upcoming 3Q07 results announcement. For prudence, we are reducing our earnings to account for: 1) the full impact of US$248m on FY07, comprising potential forex losses of US$165m and amounts under investigation of US$83m; 2) lower associate earnings from the Cosco Shipyard Group as a result of a reduced effective stake from 30% to 22%; and 3) a S$230m gain from the share sale of Cosco Corporation (Singapore). We have not accounted for legal expenses associated with potential legal proceedings. Target price lowered to S$4.70 from S$4.90 following our earnings reduction; downgrade to Trading Sell. Our target price remains based on blended DCF, P/E and DDM valuations. We expect a knee-jerk sell-down in the market but believe the unauthorised transactions would not affect order-book execution and SembMarine?s earnings outlook for FY08-09. Management has given the assurance that the transactions are unlikely to hurt future contract wins. We maintain our bullish view on the offshore and marine sector with the possibility of an extended cycle beyond 2011. SembMarine?s share price has run up 26% in concurrence with the present oil-price bull run. We believe short-term negative newsflow should abate as the extent of provisions becomes clear. Downgrade from Outperform to Trading Sell. We are looking at buying again when the share price comes down to our target price. |
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nickyng
Supreme |
23-Oct-2007 09:23
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err..so wat's this sale of Cosco sale of one time profit S$230m trying to imply? Illegal forex trading=US$250m ~ S$364m...so less off S$230=S$134m NET LOSS ?!?!?! so that is the tentative loss of $134m for no reason hor? no taking into account of actual/realised loss depending on the movement of actual forex rates...jiak lart this burger....hmm..so wat is the morale of this story?? CAO=F&N=SembMarine?? well...even true sg bluechips are also like our sgx-listed china brothers lah...wat governance are we taking abt in sg bluechips?? garbbage !!!! hee... enough tok....10am start trading...see me in actions...oops..i mean SHORTING !!! hee.. cheers! |
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Pinnacle
Master |
23-Oct-2007 08:32
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SembCorp Marine says sells Cosco Corp shares for S$230 mln Singapore's SembCorp Marine The company said in a statement that after the sale of the 39 million shares it would still hold 111.4 million shares, or 4.98 percent of the share capital, of Cosco which has several ship and offshore drilling-rig building yards in China. The share sale was announced only hours after SembCorp Marine, the world's second-largest rigs builder, said it had removed a finance executive after he allegedly undertook "unauthorised" foreign exchange transactions which may lead to potential losses for the firm. The alleged transactions could result in an unrealised forex loss of $165 million to SembCorp's subsidiary, Jurong Shipyard Pte Ltd, (JSPL), the company had said in an earlier statement. The amount does not include a total of around $83 million, which JSPL had paid to one of the banks before the transactions were discovered, it said. SembCorp Marine said that Wee Sing Guan, director group finance, who is allegedly responsible for the forex deals, has been relieved of his duties at the firm and has also resigned from his directorships in the firm's subsidiaries. The company has appointed law firm Drew & Napier LLC jointly with accounting firm Ernst & Young to investigate the unauthorised transactions and to work with a special committee of SembCorp Marine's board, it said. It said that the impact of these transactions on SembCorp's financial results for 2007 would depend on exchange rate movements as well as the outcome of investigations and disputes. Shares of SembCorp Marine and SembCorp Industries SembCorp Industries said in a separate statement that the financial impact arising from the losses incurred by Jurong Shipyard, if any, would be limited to the extent of its ownership of SembCorp Marine. |
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elfinchilde
Elite |
23-Oct-2007 07:56
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shplayer, the tech count gives 5.1 likely target. max lowest possible 4.84. just fyi. :) and yea farmer, don't bother abt the titles; it's the quality of the engagements. |
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derekchong
Veteran |
23-Oct-2007 07:03
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With this type of bad news, it will down below $ 5.00. |
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wonderfulday
Member |
22-Oct-2007 22:53
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There is still SembMar Put warrant to look at..... |
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Pinnacle
Master |
22-Oct-2007 22:49
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Farmer. Its just sharing of different views. Master or not counts for nothing. |
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Pinnacle
Master |
22-Oct-2007 22:38
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On hindsight, it always appear clear and obvious. If this issue did not take place, well I believe nobody will say that if we do this or that, it will not happen this way or that way. This is another learning cycle for them and everybody else. We only invest into the company when we have the confident and faith in their management. If not, my advise is to move on and look for another pot of gold elsewhere. |
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Farmer
Master |
22-Oct-2007 22:37
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Not 1, not 2 but 3 now. Suddenly, I found myself engage with 3 Masters. I guess it's time to turn in early. Let's watch the market's response tomorrow and after. |
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Sporeguy
Elite |
22-Oct-2007 22:37
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It has a reserve (presume earning reserve) of $920mil. I think it will settle for about 10% drop in price, slightly above $5 water level. |
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shplayer
Elite |
22-Oct-2007 22:32
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SporeGuy, My est is as follows: 19 Oct close $5.60, Less 3% for today's fall.......$5.43. USD250m loss on this fiasco is about 17.6ct per share......say 18 cts. Total expected correction (from FA point of view) 5.43 - 0.18 = $5.25 Say, give another 5% from adverse sentiment, we are looking at sub $5.00????....just my opinion....caveat emptor. |
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Sporeguy
Elite |
22-Oct-2007 22:21
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SembMarine made a profit of S$248 million in 2006. Assuming that its pfrofi\t increase by 50 %. Then this yr's profit will amount to about US$248 million will be just enough to cover the loss of US$250mil. Hi Shplayer, how much will affect the share price ? Mr Wee Sing Guan graduated from Nanyang U in 1972. Joined the company in1974 as an accountant. Was CFO from 2000 to 2006, after which held the position of Financial controller. This indicates it is not prudent to keep the same person in the same dept throughout his carreer. Must rotate them to avoid this type of problem. This rotational method is used very often in the public sector. |
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shplayer
Elite |
22-Oct-2007 22:18
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Farmer, The fortune or misfortune of minorities have little or no bearing on the company. As Pinnacle said, this will present an opportunity for those who missed the boat in the recent rapid rise in SCM share price. |
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Pinnacle
Master |
22-Oct-2007 22:08
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Then new opportunity arise for us to take new position.
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Farmer
Master |
22-Oct-2007 22:04
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Although the company will definitely survive with possibly a sharp correction to it's share price, some unfortunate investors(heavily vested) may be bring down to their knees. Let's stay tune for more info to come. |
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Pinnacle
Master |
22-Oct-2007 21:50
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shplayer is the man. We have the same view and opinion. |
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