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Technical Outlook (Sembcorp Marine)
Trend Spotting | 03 December 2010
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By: Xavier Lim
Articles (51) Profile

Sembcorp Marine (SCM)’s share price has fallen by around 6% since it peaked at $5.20 on 10 Nov-10, based on 30 Nov-10 closing price of $4.87. SCM formed a bearish engulfing pattern on 11 Nov-10, followed by a black ‘marubozu’ candlestick (bearish confirmation). Thereafter, it continued its bearish trend by forming another 2 falling three methods. The 2nd falling three methods appeared when SCM was not nominated to build any of the potential 12 rigs by independent drillers. SCM’s bid price for Petrobras’ 28-rig tender was fourth in line and just 0.1% above Keppel Corporation’s bid price.

In addition, the 10-day and 30-day moving averages are about to turn into bearish crossover, signaling that the short-term picture is biased towards the bearish side. Moreover, the RSI indicator is trending down towards the 50 level; all these signals suggest that the downside momentum has been built up. If you are observant enough, you will notice that SCM’s share price has actually fallen below the upward trend line when it formed the 1st falling three methods.

Immediate support lies at around $4.50. If the share price can move up and break the downward trend line (refer to the chart below), it is likely that a change in trend could be imminent and SCM would retest the resistance of $5.20.

DnB NOR (DnB) warned that SCM, which has submitted the 4th lowest bid in the Petrobras’ part 2 tender is like to walk away empty-handed. DnB believes that the market has already priced in the potential new Petrobras rig orders, based on SCM’s valuations. Therefore, if SCM does not win any awards, it will be very negative for SCM. DnB reiterates its ‘Sell’ rating with a target price of $3.

On the other hand, RBS argued that recent share price correction presents a good ‘Buy’ opportunity. According to RBS, although SCM was the 4th lowest bidder, it is still a strong contender for Petrobras’ 28-rig tender. The fund house maintains its ‘Buy’ rating with a target price of $5.50.

View Full-sized Image
1-year chart for SCM
1-year chart for SCM

View Full-sized Image
1-year chart for SCM
1-year chart for SCM

Armed with an arsenal of investment knowledge, Xavier is the Senior Research Editor at Shares Investment.

Please click here for more information about this author.

Sembcorp Marine  1.270 -0.020 -1.55%   
Business: Co is a leading global marine & offshore engineering group. [FY18 Turnover] rigs & floaters, repairs & upgrades, offshore platforms (98.8%), ship chartering (1%), others activities (0.2%).

Insight: May-19, 1Q19 revenue fell 31.3% to $810.6m due to ... Read More

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