Investors who track the Straits Times Index (SGX: ^STI), or STI, will know that Singapore Exchange Limited (SGX: S68), or SGX, performs a quarterly review of all the index’s constituents.
Back in March, there was no change to the constituents for the bellwether, blue-chip index.
But for June’s quarterly review, it was announced that Seatrium Limited (SGX: S51) will be replacing Keppel DC REIT (SGX: AJBU) and that this change will take effect from 19 June.
Keppel DC REIT has been bumped into the STI’s reserve list.
Four other stocks are also in the reserve list – CapitaLand Ascott Trust (SGX: HMN), Frasers Centrepoint Trust (SGX: J69U), Olam Group (SGX: VC2) and Suntec REIT (SGX: T82U).
Investors may be wondering about Seatrium and what the company does, hence we highlight eight things you need to know about this offshore and marine group.
1. A name change
Seatrium used to be known as Sembcorp Marine Ltd, or SMM.
Investors may have been more familiar with its old name but the group has decided to adopt a new branding in April this year after the completion of its acquisition of Keppel Corporation Limited’s (SGX: BN4) offshore and marine (O&M) division.
We elaborate more on this later in the next point.
Seatrium is a combination of the words “Sea” and “Atrium” and was picked out of more than 1,000 generated names.
The new name reflects the business’s aspiration to become a premier global player providing innovative engineering solutions for the O&M and energy sectors.
2. Acquisition of Keppel’s O&M division
Seatrium had just acquired Keppel’s O&M division in a S$4.5 billion transaction.
Notably, the deal was structured as an acquisition by Seatrium of Keppel’s O&M division, which was a major change from the originally-planned S$9.4 billion merger.
The successful conclusion of this purchase came about nearly two years after both companies mooted the idea of a potential combination.
3. Demerged from Sembcorp Industries
This is not the first major corporate exercise that Seatrium has undergone.
Back in September 2020, Seatrium used to be a subsidiary of Sembcorp Industries Ltd (SGX: U96) but was spun out in a demerger exercise.
Sembcorp Industries’ rationale for doing so was to free up its energy and urban development divisions without experiencing a drag from Seatrium.
4. Two rounds of rights issues
Seatrium faced tough industry conditions back in 2020 and 2021 which severely affected the group’s ability to carry on as a going concern.
As a result, Seatrium went through two rounds of rights issues to recapitalise its balance sheet.
The first round was in July 2020 and involved the issuance of five shares for each existing one held at an issue price of S$0.20 per rights share.
The second rights issue was announced in August 2021 and three rights shares will be issued for every two held at an issue price of S$0.08 per rights share.
Because of these two rights issues, Seatrium now has around 31.4 billion shares in issue.
5. Three consecutive years of losses
Back in April, Seatrium gave the exchange notice of three consecutive years of losses due to the ongoing O&M downturn.
SGX will place a company on its watch list if it incurs three consecutive years of losses and if its market capitalisation falls below S$40 million over the last six months.
With Seatrium’s current market capitalisation of around S$8.6 billion, the group is in no danger of being placed on this list.
6. A strong net order book
Seatrium reported its fiscal 2023’s first quarter (1Q 2023) business update which saw a good start to the year as the group clinched multiple project wins.
The marine giant saw its net order book of ongoing projects increase to more than S$20 billion.
Around 39% of these projects involved renewables and cleaner or green solutions.
7. Strategic review
Seatrium is undertaking an ongoing strategic review that should conclude by the end of this year.
CEO Chris Ong said that this holistic review will look at Seatrium’s capital structure following the acquisition and also how the group can position itself for further growth opportunities as the world undergoes a “green” transition.
Seatrium is also mulling over a possible share consolidation, given its high number of issued shares currently.
8. CPIB investigation
The Corrupt Practices Investigation Bureau (CPIB) announced that it had commenced investigations against Seatrium for alleged corruption offences.
Seatrium has clarified that this investigation relates to events that occurred before 2015 and relate to the Sembcorp Marine group at the time.
These investigations likely involve Brazil and Operation Car Wash, a major anti-corruption probe initiated by the country to root out any wrongdoing by politicians and large Brazilian companies.
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Disclosure: Royston Yang owns shares of Keppel DC REIT, Suntec REIT and Singapore Exchange Limited.
