Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

One More Day To Trade Sembcorp Marine Rights, Harvest the Spread, or Buy The MGO Option

Sembcorp Marine Rights Done - The MGO Option It Is

Sembcorp Marine MGO - The Implied Option Tells You About the Market, And It's The Wrong Price.

Sembcorp Marine Bites the Bullet - Big Rights Offering - And May Combine with Keppel O&M

Sembcorp Marine Rights Decided And "Virtual IPO" Set (Still Avoid)

Sembcorp Restructuring Details & Timing Announced - The Arithmetic Is Compelling

Quiddity Advisors

Event-Driven

Two months ago, <a href="https://www.smartkarma.com/entities/sembcorp-marine-ltd" target="_blank" data-smartkarma-citation="entities:11:1" rel="noopener">Sembcorp Marine (SMM SP)</a> announced a Rights Offering to raise S$1.5bn to recapitalise operations and provide working capital for the 16 projects currently under execution, some of which have been hit by delays where payment was expected sooner and it will instead come later. 
The Rights Offering, coming on top of another Rights Offering and distribution of shares a year ago as the company was <s>cast away by</s> separated from its erstwhile parent <a href="https://www.smartkarma.com/entities/sembcorp-industries-ltd" target="_blank" data-smartkarma-citation="entities:1087:1" rel="noopener">Sembcorp Industries (SCI SP)</a> seemed to upset shareholders who did not understand why a second large offering in a year was needed. The simple answer was that last year, the net capital raise was minimal. It was primarily designed to generate proceeds to be able to pay back a large loan extended by its parent before the split. This year it is about survival.  
As I noted then, it was important to read the <a href="https://links.sgx.com/FileOpen/Trading%20and%20Liquidity%20Update.ashx?App=Announcement&amp;FileID=672231" target="_blank" rel="noopener">Trading and Liquidity Update</a>. The big points are:
<div>
<ol style="list-style-type: decimal;">
<li>Workers are scarce. Costs are up. There are supply constraints because of covid-19. Foreign workers who left can't come back. Relative Singapore success in fighting covid early on raised labor costs locally. It is tough to get new workers and new covid-19 measures introduced in May 2021 won't make it easier. </li>
<li>Projects are delayed. Cash Flows are delayed. In particular, the delivery of two drillships to Transocean has been deferred from FY21/22 to FY2023 and later, delaying S$610mm in cash flow.</li>
<li>The company needs to optimize cost structure</li>
<li>Group turnover this year has been lower than expected. </li>
<li>The group needs to raise money to get comfort on ability to complete existing contract base.</li>
<li>The company is pivoting to renewables and clean energy solutions.</li>
</ol>
The company needs money for all this. And a Rights Issue would provide certainty and immediacy.
The Securities Investors Association (Singapore), which has the general reputation of standing up to companies which do deals where retail investors are inconvenienced, came out with a press release with questions on <a href="https://sias.org.sg/latest-updates/press-statement-questions-to-sembcorp-marine-on-its-latest-proposed-rights-issue/" target="_blank" rel="noopener">15 July</a> which SMM answered on <a href="https://links.sgx.com/FileOpen/Announcement.ashx?App=Announcement&amp;FileID=675213" target="_blank" rel="noopener">19 July</a>.  The company got its Approval in Principle in early August from the SGX. SIAS sponsored a virtual dialogue on <a href="https://sias.org.sg/latest-updates/transcript-of-sias-sembcorp-marine-virtual-dialogue-6-august-2021/" target="_blank" rel="noopener">6 August</a>. There was an update on the <a href="https://links.sgx.com/1.0.0/corporate-announcements/JWHV82WCY953USMS/7bf07888e4783b9b297db68ce0cfac6a63afa1e381c0f244820b7f7d26feba8f" target="_blank" rel="noopener">18th of August</a> from the company, a further very late-in-the-day Q&amp;A published on <a href="https://links.sgx.com/FileOpen/Response%20to%20additional%20questions%20from%20shareholders.ashx?App=Announcement&amp;FileID=680896" target="_blank" rel="noopener">23 August</a> in the morning before the EGM, the EGM was held yesterday, the Rights Offering was approved, and...
...Today after the close, we have an announcement of the Rights Trading Period (31 Aug - 8 Sep), the Exercise Period (31 Aug - 14 Sep) and Pay Date (22 Sep) along with a re-delivery of all the documents from late June and early August (<a href="https://links.sgx.com/FileOpen/Launch%20Announcement.ashx?App=Announcement&amp;FileID=681089" target="_blank" rel="noopener">Announcement</a>, <a href="https://links.sgx.com/FileOpen/Media%20Release.ashx?App=Announcement&amp;FileID=681090" target="_blank" rel="noopener">Media Release</a>, <a href="https://links.sgx.com/FileOpen/Presentation.ashx?App=Announcement&amp;FileID=681091" target="_blank" rel="noopener">Presentation</a>, and <a href="https://links.sgx.com/FileOpen/Trading%20and%20Liquidity%20Update.ashx?App=Announcement&amp;FileID=681092" target="_blank" rel="noopener">Trading and Liquidity Update</a>).
24 August was the last day to trade WITH rights. 25 August is the first day to trade ex-rights.
There is strategy involved. 
Much more below the fold.
</div>

Two months ago, Sembcorp Marine (SMM SP) announced a Rights Offering to raise S$1.5bn to recapitalise operations and provide working capital for the 16 projects currently under execution, some of which have been hit by delays where payment was expected sooner and it will instead come later. 
The Rights Offering, coming on top of another Rights Offering and distribution of shares a year ago as the company was cast away by separated from its erstwhile parent Sembcorp Industries (SCI SP) seemed to upset shareholders who did not understand why a second large offering in a year was needed. The simple answer was that last year, the net capital raise was minimal. It was primarily designed to generate proceeds to be able to pay back a large loan extended by its parent before the split. This year it is about survival.  
As I noted then, it was important to read the Trading and Liquidity Update. The big points are:


Workers are scarce. Costs are up. There are supply constraints because of covid-19. Foreign workers who left can't come back. Relative Singapore success in fighting covid early on raised labor costs locally. It is tough to get new workers and new covid-19 measures introduced in May 2021 won't make it easier. 
Projects are delayed. Cash Flows are delayed. In particular, the delivery of two drillships to Transocean has been deferred from FY21/22 to FY2023 and later, delaying S$610mm in cash flow.
The company needs to optimize cost structure
Group turnover this year has been lower than expected. 
The group needs to raise money to get comfort on ability to complete existing contract base.
The company is pivoting to renewables and clean energy solutions.

The company needs money for all this. And a Rights Issue would provide certainty and immediacy.
The Securities Investors Association (Singapore), which has the general reputation of standing up to companies which do deals where retail investors are inconvenienced, came out with a press release with questions on 15 July which SMM answered on 19 July.  The company got its Approval in Principle in early August from the SGX. SIAS sponsored a virtual dialogue on 6 August. There was an update on the 18th of August from the company, a further very late-in-the-day Q&amp;A published on 23 August in the morning before the EGM, the EGM was held yesterday, the Rights Offering was approved, and...
...Today after the close, we have an announcement of the Rights Trading Period (31 Aug - 8 Sep), the Exercise Period (31 Aug - 14 Sep) and Pay Date (22 Sep) along with a re-delivery of all the documents from late June and early August (Announcement, Media Release, Presentation, and Trading and Liquidity Update).
24 August was the last day to trade WITH rights. 25 August is the first day to trade ex-rights.
There is strategy involved. 
Much more below the fold.


Sembcorp Marine Goes Ex-Rights - Strategy From Here

Seatrium

Sembcorp Marine Goes Ex-Rights - Strategy From Here