The effects of HHI’s takeover of Daewoo spells opportunities for Singapore’s maritime players on a global scale.
The time may be ripe for Singapore’s shipyards to join forces to create a national champion that could stand head-to-head with Korea’s maritime titans who are currently undergoing short-term distress brought about by their consolidation plan.
Hyundai Heavy Industries (HHI) and Daewoo Shipbuilding & Marine Engineering (DSME) are embarking on the massive task of completing their take-over deal and processing the restructuring exercise which could just be the chance that Keppel Corp, Sembcorp Industries (SCI) and Sembcorp Marine (Sembmarine) need to wrestle market share.
As the integration is set to soak up HHI and DSME's resources in the next one to two years, the situation could bode well for Sembmarine, Keppel Offshore & Marine (O&M), and Yangzijiang to gain market share in the O&M and shipbuilding space, CGS-CIMB analyst Siew Khee Lim said in a report.
Sembmarine, in particular, is set to benefit given its hunger for establishing a track record in the newbuild floating production storage and offloading (FPSO) arena.
The most notable FPSO contract at the moment is the c.US$1.4b-1.5b Rosebank project for Norway’s Equinor fiercely contended for by Sembmarine and DSME. “We think the project is highly likely to be awarded in 2019 with the completion of Equinor’s acquisition of Chevron’s 40% stake in Rosebank in January 2019,” said Lim.
“If the rig building industry does not recover in the next three years, we think the consolidation of both Sembmarine and Keppel O&M could strengthen Singapore in the large-scale FLNG (Keppel) and FPSO (Sembmarine) newbuild segment as well as create an O&M design and engineering powerhouse, competing head-on with the Koreans,” she added.
“A hypothetical and ideal structure would come in the form of one mega yard (Sembmarine + Keppel O&M), one renewables/utility group (SCI), and one urbanisation /infrastructure group (Keppel),” she added.
In this scenario, SCI could emerge the long-term winner as a pure renewable energy/utility group focusing on overseas M&A to grow its capacity, commanding higher valuations. On the other hand, Keppel could continue to pursue its urbanisation solutions angle (property and infrastructure), backed by asset management capital.
“The current book values of Sembmarine and Keppel O&M amount to $5.3b,” Lim said. “The hypothetical shareholding structure of the enlarged yard could be in the form of a joint venture (JV), with Temasek having a majority control stake.”
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