SMM

SMM: (S$1.325) Will Temasek use telco stake sale proceeds to privatise SMM?*-There is a plausibility that Temasek could use proceeds from stake sales to Singtel to privatise and restructure SMM.-Such a scenario makes sense as the shipyard business is a strategic industry for Singapore. This would buy time for SMM while waiting for industry recovery.-Currently, Temasek owns 49.5% of SCI, which in turn owns 61% of SMM. MKE postulates two possible privatisation options- Option 1: Temasek offers an all-cash offer for SMM with SCI undertaking not to sell its 61% stake. Temasek would end up having a direct 39% interest in SMM plus deemed interest through its stake in SCI. With 69.2% effective interest, Temasek would have sufficient control to restructure or develop SMM.-Option 2: Temasek makes an offer for 100% of SMM and support the rigbuilder financially. SCI can then focus on developing its utilities business. -Maybank KE currently has Sell ratings on SCI (TP $2.35) and SMM (TP $1.00)