SembMarine denies that its PPL yards are up for sale

Singapore - Mainboard-listed yard group Sembcorp Marine said neither its rig-building subsidiary PPL Shipyard nor any of the yards from which PPL is operating are up for sale.

SembMarine is understood to have sought valuation for one or more of PPL Shipyard's waterfront assets, sparking market talk over its plans for its rig-building subsidiary.

Asset valuations are typically done when owners are evaluating financial options, including divestment.

A SembMarine spokesman, responding to an enquiry from The Business Times, denied that the yard group is putting up PPL Shipyard or any of the rig-builder's yards for sale.

But IHS Markit's principal researcher Ang Dingli said some rationalisation of SembMarine's waterfront assets needs to take place, given that the group's yard operations will eventually be integrated at the new Tuas Boulevard facility, which is undergoing phased development.

Mr Ang also projected that newbuilding activity for oil and gas-linked offshore and marine assets will not rebound in the next five to 10 years. He suggested that owning more yards will only be a liability under such unfavourable market conditions for rig-builders or shipbuilders in general.

Knight Frank's executive director Tan Boon Leong pointed out that the rule by JTC, Singapore's principal developer and manager of industrial estates and their related facilities, does not allow the sale of an industrial property sitting on land with under five years left on its lease. This implies industrial lessees will be inclined to evaluate their options for their properties five or more years before the leases run out.

SembMarine's annual report for FY15 noted that PPL Shipyard operates out of a facility in Tuas Crescent under a 91/2-year lease with JTC. This yard sits on more than 58,000 sq m of land.

PPL Shipyard also occupies two other plots along Pandan Road, one on a 15-year lease and the other, a 30-year term lease. The plots exceed 141,000 sq m and 9,000 sq m in size respectively.

JTC assigns leases based on certain criteria, including economic contributions from the lessees. Mr Tan noted one requirement is infrastructure investment in an amount proportional to the assigned land area.

Going by Mr Tan's reading of the industrial property market in Singapore, the prospect of securing a buyer in the resale market for a leasehold shipbuilding property remains slim under the current economic climate.

With the exception of two bright spots - electronics and biomedical - the rest of the industrial sector, particularly oil and gas and shipbuilding, has been hit by a weaker economy, he said.

Shares in SembMarine closed at S$1.44 on Thursday, down 2 cents.

This article was first published on December 9, 2016.
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