Friday 26 November 2004

SembCorp loses Solitaire appeal

I had written in August (see "Solitaire still haunts SembCorp") that Singapore-listed SembCorp was haunted by an old, disputed contract from Allseas Marine Contractors SA to convert the Swiss company's bulk carrier Solitaire into a pipe-laying vessel. When SembCorp allegedly failed to finish the job on time, Allseas sued. A UK court ruled subsequently ruled against SembCorp, which duly appealed.

SembCorp has now announced that it has lost its appeal over the case.

SembCorp loses appeal over disputed ship conversion contract
SembCorp Industries Ltd says the High Court of England has dismissed its appeal against a ruling on a disputed ship conversion contract... "Accordingly, the Board of Directors of (SembCorp) has decided to make an additional provision of S$200 million," it said... SembCorp said its final exposure "will depend on the outcome of further hearings on other claims made by both parties in the arbitration, and the final quantum may differ from the current estimate."

$200 million translates to about 10 cents a share. This threatens to erase most of this year's earnings.

The stock closed yesterday at $1.48. This translates to a price to 2004 earnings ratio of about 12, assuming that the earnings are not adjusted for the provision. This ratio appears quite reasonable, being slightly below the market's P/E ratio of about 14, which suggests that probably the problem associated with this contract is already at least partially discounted in the price.

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