I will like to request your assistance to raise a query to Sembcorp Marine due to its recent Corporate Action.
Sembcorp Marine has announced a rights issue of 3 rights for every 2 shares at 8 cents. I find this share issue unfair to minority shareholders and would request your team to raise it.
Firstly, while we understand Sembcorp Marine is raising money for its business, I question the huge discount required for 2021’s right issue. In this round of rights, the discount to TERP for the last day (35.7%) and 5- day VWAP (36.2%) is much higher than 2020’s; in 2020, it was 35.1% and 21% respectively. This does not make sense because SembCorp Marine is (i) now in a stronger financial position than its pre-2020 rights issue, (ii) the industry has become better and (iii) Sembcorp Marine has a higher net cash balance. All these points to the fact that TERP could have been done at a 20+% discount value.
Secondly, while Sembcorp Marine may argue that 2021 rights issues had to be priced lower due to investor’s fatigue in the company’s frequent rights, it points to the question of the need to raise $1.5 billion. The cash burn rate for SCM in FY 2020 was not high (about $850 million) during a disastrous COVID year. With SCM, recently raising $500 mil in green bonds for its projects and a cash balance of $770 million, it is definitely plausible SCM could have raised $850 million and be able to last to end 2022. SCM could have staggered the cash raising to smaller tranches on an annual basis. This would allow minority shareholders (who do not have the financial backing of a country’s past reserve) to participate in SCM’s rehabilitation.
Based on these two pointers, I hope SIAS could flag them as a query to SembCorp Marine about (i) how its has priced the discount to TERP and (ii) on the amount raised.