Seatrium (SGX: S51) is the former Sembcorp Marine. No, the name change was not all about that Brazilian corruption inquiry - that's all dealt with anyway. Rather, there was a merger of interests and a name change seemed like a sensible thing to do at the time. “ Singapore, 3 April 2023 – Sembcorp Marine Ltd (the “Company” or “Sembcorp Marine” and, together with its subsidiaries, the “Group”), is proposing to change its name from “Sembcorp Marine Ltd” to “Seatrium Limited” following completion of the combination of the businesses of the Company and Keppel Offshore & Marine Ltd on 28 February 2023, and will adopt a new branding for the enlarged entity.” Seems fair enough, change the structure of the business then why not change the name of it at the same time?
It's possible to wonder though for of course there was that story about Brazilian corruption. This did cause serious damage to the share price, for a time. The report was that Sembcorp's Brazilian subsidiary was being investigated in a corruption inquiry. Well, yes, it was. But nothing to do with current activities at all. This was all entirely historical activity. And, if we're honest about it, given the heroic levels of corruption in Brazil back then we'd all be more than a little surprised if there hadn't been something. As it became clear that this was all entirely historic and nothing to do with current activities the price recovered for Sembcorp.
Seatrium share price from Singapore Stock Exchange
What matters now is, of course, how that newly combined business does. For one of the things about the shipbuilding business - the earlier main line of business - is that there's horrible overcapacity in it. It's the type of large scale industrial activity that governments love to subsidise, so they do. But of course subsidy to government owned or backed shipyards means those operating on a purely capitalist basis face declining prices and therefore margins.
Thus the move into what it is hoped will be a more profitable area, offshore marine services. This is something that isn't mere metal bashing, this is value added work more than merely the crafting of steel into hulls. With the developments of both oil and gas and also offshore wind there's a hope that matters can be improved. Whether that's true or not really depends upon how many others try to follow the same business strategy. And, possibly, how many governments are willing to try subsidising their shipyards in following it. Seatrium does face the possibility that the subsidised competition will try to follow upmarket. If it does then we could see the same depressing scenario all over again. On the other hand moving upstream into value add is something that a subsidised by government organisation will find difficult - so perhaps that competition won't appear.
