Jardine Matheson Holdings will be added to the Index in its place, and the next review will be conducted on Dec 1 this year.
(See Sembcorp Marine dropped from ST Index in quarterly review)
In a Friday report, analyst Lim Siew Khee says the incident may put some pressure on SMM’s share price, but the price movements could be “minor”.
Lim explains this is because most international funds, such as SMM, are benchmarked to MSCI indices with mandates that span across regional groups – while STI is usually used only by single-country funds.
The analyst nonetheless continues to note a challenging operating environment ahead for the group.
“Order momentum has been weak with orders worth $320 million won YTD, including variation orders,” notes Lim.
She also highlights the risks of inventory impairment for jack-up rigs that are likely to be cancelled by customers with credit risks such as Malaysian Perisai Teknologi and Mexican Oro Negro, with two and three jack-up rigs respectively.
“Although profits from these rigs were reversed in 2015, we see risks of inventory impairment if SMM is unable to find buyers for these undelivered rigs.”
As at 11:55am, shares of SMM are trading 1.98% lower at $1.24.
