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25 Aug 2020  (443 Views) 
Monetary Auth of Singapore

MAS should require the prospectus to be more useful - Sembcorp Marine Rights issue

Pages 22 to 37 of the offer document from the sole financial advisor (DBS) contain a description of the risk factors put forward by the directors. This is a total of 15 pages that the investor is required to read. 

The headings for these risk factors are:

* Risk relating to the group business

* The Group and its customers, suppliers, vendors and other business partners are affected by external environment risks, including pandemics such as COV-19 pandemic

* The company is subject to liquidity risks

* The Group faces project management and execution risks

*The Group is subject to third party risks in respect of its contractors, suppliers and vendors of its projects

* The Group is exposed to credit risks and risk arising from credit term extended to its customers.

* The Group is exposed to foreign currency risks.

* The Group's business is capital intensive and may require additional financing in the future for growth

* The Group's leverage exposes it to various risks, including reducing available cash flow and the need to comply with restrictive covenants that may, among others, inhibit its ability to incur more debts or pay dividends

* The contracts in the order backing of the Group may be adjusted, cancelled, suspended and therefore, the order backlog is not necessarily indicative of future operating revenue of the Group

* There is intense competition and possible new competitors in the market segment in which the Group operates

* The Group may not be successful in implementing its future plans

* The Group may not be able to successfully integrate or achieve synergies from its investments or acquisitions, and may be exposed to contingent liabilities relating to the businesses it acquires.

* The Group faces the risk of insufficient insurance coverage

* The achievements of the Group's objectives and strategies depend significantly on its employees

* The Group is subject to international and local environment and safety regulations and risks

* The Group is exposed to potential liability arising from any damage, injury or death resulting from accidents or other causes.

* The Group has operations in emerging market countries and is subject to risks involved in such countries.

* The Group is affected by political risks in countries where it operates.

* The Group is subject to laws, government regulations and policies governing its operations and is required to obtain the relevant government permits, licenses and approvals.

* The interpretation and application of laws and regulations in the jurisdictions in which the Group operates may involve uncertainty.

* The Group is subject to risk of representational damage

* The Group may be involved in legal and other proceedings from time to time.

* The Group is subject to operational, business and political risks in Brazil where it operates

* Risks relating to an investment in the Rights, the Rights Issue and the Shares

I read through the 15 pages quickly and concluded that most of the motherhood statements are a waste of time and actually distract the reader from the real issues that should be addressed. 

There are some useful information such as:

* The impact of the covid-19 pandemic on the operations of the Group.

* The current happenings in Brazil which has a significant impact on the Group.

I would have preferred the statement on Risk Factors to focus on the real issues. It could be stated as follows:


The Group faces risks that are normally expected for a business that operate in several countries and deal with several business partners. 

The exceptional risks that require the attention of the investors are as follows: 

I hope that we can get away from mindless nonsense and provide the information that are important for shareholders and investors to make their decisions.

Tan Kin Lian

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