Monday, March 30, 2015

Sembcorp Marine

Sembcorp Marine: In connection to the widening corruption probe in Brazil, Sembcorp Marine (SMM) disclosed that one of its agents, Guilherme Esteves de Jesus, who was involved in several rig contract awards, has been arrested by the Brazilian authorities.

Recall in Jan '15, an ex-Petrobras executive alleged that shipyard contractors, including Keppel Corp and SMM, paid bribes to secure rigbuilding contracts from Sete Brasil, a company set up to own rigs for state-owned Petrobras.

Due to the ongoing investigations, Sete Brasil is on the brink of a technical default after Brazilian Development Bank delayed a US$3.2b loan, which left the Brazilian rig owner at least two months in arrears on its payments to contracted shipyards.

While both SMM and Keppel Corp has denied any involvement or wrongdoings in the corruption cases, citing their strict anti-bribery policy, Maybank-KE reckons that a write-down for the shipyards may be inevitable.

Currently, SMM is building seven drillships worth US$5.6b for Sete Brasil, and have invested close to US$1b in a new yard in Brazil, while Keppel Corp has six submersible orders worth US$4.9b under construction.

Maybank-KE maintain its Sell rating on SMM (TP $2.65) and Hold on Keppel Corp (TP $8.60).

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