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To buy "cheap" from a troubled company?

(not vested)

Sembcorp confirms in 'preliminary' talks with 1MDB on Edra Global Energy

SINGAPORE (June 4): Sembcorp Industries ( Financial Dashboard) is in “preliminary” talks with 1Malaysia Development Bhd on a possible acquisition of the government-owned strategic development fund’s wholly-owned subsidiary Edra Global Energy.

“This is really very preliminary. I can’t say whether we are keen or not. It is one of those deals that we explore on a regular basis,” a company source says, adding that it was a surprise that news of the talks had leaked out at such an early stage.

The Edge Financial Daily reported today that Sembcorp joins IJM Corp ( Financial Dashboard) and Tenaga Nasional ( Financial Dashboard) as contenders for Edra Global which has an enterprise value of as much as RM18 billion ($6.56 billion).

Sembcorp is down 5 cents at $4 as at 10:14 a.m.
NAV of 3.30 and forward PER of 13/14 X . Took a position on Friday.
Hi all, I was looking at Sembcorp utilities segment and one thing that struck me was that it had a relatively low liabilities/equity ratio (~1.55) for for a utilities company. Here are the L/E ratios of other utility companies worldwide for comparison:

Duke energy corp 1.95
Huaneng 2.24
YTL international berhad 2.75
nextera energy 2.76

Anyone knows why this is the case?
(07-06-2015, 08:18 PM)Ivan Lu Wrote: [ -> ]Hi all, I was looking at Sembcorp utilities segment and one thing that struck me was that it had a relatively low liabilities/equity ratio (~1.55) for for a utilities company. Here are the L/E ratios of other utility companies worldwide for comparison:

Duke energy corp 1.95
Huaneng 2.24
YTL international berhad 2.75
nextera energy 2.76

Anyone knows why this is the case?

Did u look at sembcorp or sembcorp utilities? How did u split out the balance sheet to the utilities segment?
Hi I just looked at the segment assets/liabilities of SCI's segment reporting.
From RHB - didn't realise the extent of the overcapacity in Sg grid.

Sembcorp announced it has obtained exclusive rights to develop a
750ha integrated township and industrial park in the Nghe An Province
in Vietnam. This is its seventh such project, which operates on a
decade-long timescale and we see no near-term financial impact. Both
its utilities and marine divisions continue to suffer due to strong macro

 Seventh VSIP JV project. The Nghe An infrastructure project is the
seventh such for the Vietnam Singapore Industrial Park Joint Venture Co
(VSIP JV). With surveying, planning, approvals and eventual
construction to take multiple years, we do not anticipate any near-term
financial impact from this latest project, which is one of many ultra longterm
jobs undertaken by Sembcorp Industries’ (Sembcorp) infrastructure

 Multiple threats to Singapore utilities’ profitability next year. Hyflux’s
411MW plant will be connected to the grid in 2H15, adding c.3%
additional capacity to Singapore’s already oversupplied market (total
licensed capacity was c.82% above peak demand in 2014).
We believe it
could take 3-5 years for demand growth to substantially trim this
oversupply. Further threats to near-term profitability are: i) customers
renegotiating fixed-rate contracts downwards using 1Q15 pool prices as
benchmarks, ii) percentage of power generation sold through vesting
contracts is being lowered, iii) increasing take-up by consumers of solar
power generation panels, iv) Tesla’s (TSLA US, NR) PowerWall (or
similar products), a rechargeable lithium-ion battery aimed at the
residential market which synergises well with solar panels and which
together will slow the growth of overall grid demand.
Just wanna share Motley Fools' take on SembCorp while I surfing google:-

SembCorp Industries Limited (SGX: U96) reported its fiscal first-quarter earnings report yesterday evening. The reporting period was for 1 January 2015 to 31 March 2015.

The company’s source of revenue comes from its three major business segments: Utilities, Marine, and Urban Development & Others. The Marine segment’s contribution mainly comes from SembCorp Industries’ 60% stake in rig builder SembCorp Marine Ltd (SGX: S51).

You can read more about Sembcorp Industries here.

Financial highlights

Here’s a rundown on the company’s latest set of financial figures:
1.Overall revenue for SembCorp Industries for the quarter was down 11% on a year on year comparison, coming in at around $2.34 billion.
2.Consequently, net profit for the period fell a whopping 23.3% to around $187.7 million.
3.Earnings per share (EPS) thus also fell 23.6% from 10.19 cents in the first quarter last year to 7.79 cents in the reporting quarter.
4.Cashflow from operations came in at $152.1 million for the first quarter of 2015 with capital expenditures clocking in at $390 million. This gives SembCorp Industries a negative free cash flow of $237.9 million for the reporting quarter, down from the free cash flow of $567 million seen a year ago.
5.As of 31 March 2015, the company had $1.6 billion in cash and equivalents and $5.5 billion in borrowings. This gives a net debt position of $3.9 billion. Notably, $2.4 billion of the $5.5 billion in borrowings will be due only after five years. In any case, Sembcorp Industries’ balance sheet has weakened from a year ago when it had a net debt position of -$734.5 million (meaning to say it had more cash than debt).

In all, revenue and profit was down for SembCorp Industries on a year on year basis. The company also had negative free cash flow and had added debt to its balance sheet.

Operational highlights

Quarterly revenue for the Utilities segment fell by hefty 21% to $958 million when pitted against the same quarter a year ago. Revenue for this segment was impacted by lower gas offtake in Singapore and lower high sulfur fuel oil (HSFO) prices. Meanwhile, the first unit of the TPCIL power plant in India has already commenced operations, and will be in full operation by the end of 2015.

For the Marine segment, quarterly revenue was $1.3 billion, 2% lower on a year over year basis. This was mainly due to lower revenue recognition for its rig building projects and lower average revenue per repair vessel. The net orderbook to date stands at $10.6 billion; investors might want to note that the Marine segment’s net orderbook has been declining of late.

Group President and Chief Executive Officer of SembCorp Industries, Tang Kin Fei, had given some comments on the reporting quarter’s results in the earnings release:

“Amidst the challenging environment for our Singapore energy operations and Marine business, we continue to focus on project execution, as well as on enhancing operational excellence and efficiency, to manage our costs and maximise earnings.

Underpinned by sound business fundamentals and a healthy pipeline of projects, Sembcorp remains committed to delivering long-term value and growth”

Looking forward, competition is expected to be intense in both the Utilities and Marine segment. The high level of competition is expected to continue for the Singapore energy sector which is compounded by lower oil prices. At the face of the ongoing cutback in global oil exploration, competition for new projects in the Marine segment remains intense. It is expected to be a challenging year ahead for the Marine segment.

Foolish summary

At its closing price yesterday of $4.49, SembCorp Industries traded at around 10.7 times trailing earnings with a trailing twelve months dividend yield of 4.9%.

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With Hyflux Energy joining the fray, the competition in the electricity market is going to become even more intense. I feel full year EPS will be no higher than 28cts.

Sent from my iPad using Tapatalk
At the bottom of the cycle, SCI's utilities could be a right fit for the newly created KIT while marine will be a certain candidate for Kep Corp

Utilities turnover 44% Marine still the bulk

The Utilities business achieved a 17% growth in net profit in 1H15 with net profit growing to $216.0 million
from $184.4 million mainly due the gain on divestment of SBWI. Excluding the gain on divestment of
SBWI, the business’ net profit for 1H15 was lower due to the continued intense competition in the
Singapore power market and the low oil prices. However, its overseas operations continued to report
steady profit.

2015 is expected to be challenging for the Singapore energy business with continued intense competition
in the power market as well as low oil prices. The overseas business is expected to continue to deliver a
steady performance. The first unit of TPCIL power plant in India commenced operation in 1Q2015, and the
plant will be in full operation by 3Q2015.
One small question :

In their 1H report, they mentioned a NAV of S$3.61.

This is most certainly 6 454 k$ / 1787 millions shares = about S$3.61 per share.

I would have thought more exact - or prudent - to exclude the perpetual securities for a value of 802.6 M$, this value not being something that the possessors of the common shares can dispose of, at will.

Thus, a more realistic NAV, from the buyer of a common share point of view, which is exactly and only what we buy in a share quoted U96, would be 5652 / 1787 = S$3.16.

Or is it that I misunderstood the nature of those newly emitted perpetuals titles ?
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