Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on changes – just in case they’re material to our investing thesis. It was a good day for Singapore’s blue chips as 26 of the Straits Times Index’s (SGX: ^STI) 30 constituents managed to make some headway. This helped pull Singapore’s benchmark index up by 0.7% to 3,296 points. Let’s take a look at a couple of market beaters within the STI. Keppel Corporation Limited (SGX: BN4) has climbed 1.1% to S$10.57. The conglomerate announced yesterday that its marine engineering…
Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on changes – just in case they’re material to our investing thesis.
It was a good day for Singapore’s blue chips as 26 of the Straits Times Index’s (SGX: ^STI) 30 constituents managed to make some headway. This helped pull Singapore’s benchmark index up by 0.7% to 3,296 points.
Let’s take a look at a couple of market beaters within the STI.
Keppel Corporation Limited (SGX: BN4) has climbed 1.1% to S$10.57. The conglomerate announced yesterday that its marine engineering arm has secured a US$227 million contract to build a repeat high-specification KFELS B Class jackup rig. As part of the contract, Keppel’s customer, Gulf Drilling International Ltd., has options for two more of the same type of rig for deliveries in 2017.
Regarding the new jackup rig, Keppel Corp is expected to deliver it in the first quarter of 2016. Upon delivery, the rig would be chartered to Qatar Petroleum for five years.
In the announcement of the contract, Mr Wong Kok Seng, Managing Director of Keppel Offshore & Marine (Offshore), commented that the KFELS B Class rig “has established itself as a reliable high specification jackup rig for the Middle East with more than 10 such rigs successfully operating there.”
Having unique rig designs which are highly-prized by end-users can be a strong competitive advantage for Keppel Corp’s marine engineering arm so it’s good to see the company’s being validated by its customers.
Another marine engineering firm makes the list here in Sembcorp Marine Ltd (SGX: S51). The company’s shares had gained 1.3% to S$3.83. Last Wednesday, it had made a series of important announcements.
The first saw Sembcorp Marine issue S$600 million worth of notes on 10 September 2014. The notes are split into two series. More details of the notes are found in the table below:
|Series number 005||Series number 005|
|Size||S$275 million||S$325 million|
|Annual interest expense||2.95%||3.85%|
|Maturity date||10 September 2021||10 September 2029|
Source: Company press release
It’s interesting to see the company raise capital through the debt markets at this moment as it has ample financial resources (S$1.82 billion in cash and only S$940 million in debt as of 30 June 2014). But given the long tenor and low fixed interest rates for the new notes, the hurdle to make the borrowings worth their while for Sembcorp Marine is set pretty low.
The second announcement deals with Sembcorp Marine’s investment in a multi-functional steel fabrication facility. According to the company, the facility can “significantly enhance automation and productivity at its offshore rig building, conversion and production and ship-repair businesses.” The project is expected to be completed in the third quarter of 2015 and is expected to help significantly improve the overall efficiency of Sembcorp Marine’s yards. The facility “is designed eventually to be the central kitchen for steel fabrication for all three phases of the new Tuas yard.”
Within the same announcement for the multi-functional steel fabrication facility, Sembcorp Marine also touched on the progress of the development of Phase II of its Sembmarine Integrated Yard @Tuas. There are plans to build three dry docks on the Phase II site. These new docks will allow Sembcorp Marine “to service a broader spectrum of vessels ranging from mid-sized to Suezmax commercial ships as well as to build offshore exploration and production units (eg. jack-up & semi-submersible drilling rigs, drillships and production vessels).”
Sembcorp Marine has estimated it would spend around S$711 million on the new fabrication facility and the development of Phase II at its Tuas yard. The company intends to use the new S$600 million worth of notes to help fund these investments.
The last announcement is about Sembcorp Marine’s acquisition of SSP Offshore for US$21 million. SSP Offshore is based in Houston and specialises in the design, engineering, and delivery of innovative floating production and drilling solutions for the oil and gas industry. The acquisition would help Sembcorp Marine improve its capabilities as the company would gain control of SSP Offshore’s entire portfolio of proprietary solutions.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn’t own shares in any companies mentioned.