SembCorp Industries

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Stillicon, I am not to familiar with the instrument of perpetual securities, but since it is defined as asset, under a textbook definition, it would make sense to include as net asset value.

I agree with you that realistic nav is a better judgment. In some of the foreign stock exchange companies I read up on, the companies are upfront to use more usable criteria to set their own benchmarks.. Eg a bank using return on tangible equity (RoTE) rather than ROE. As such, I am becoming more keen on the integrity of management (are they doing doublespeak, or not preaching what they say) as a criteria for stock selection.

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Looking from returns perspective, funds raised from Perpetual it is an asset that can generate returns. The power of it which is it cannot depreciated like a physical asset. Neither it can be recalled by Banks which put it as a much "safer loan". However there is cost component which is deducted from profits to pay the interests. For a large stable corporation, it will be a much cheaper source / risk of funding for working capital use.

Overall the result looks quite respectable despite facing headwinds in marine and oils in addition to the competitive market in SG. One thing i do like is the cost structure has been right-sized lower than the rev reduction resulting surprise higher profits. Expanding to oversea market seems like an excellent strategic moves. On hindsight 8/3 is nice entry point for a small stake.

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(04-08-2015, 10:12 PM)stilicon Wrote: 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 ?

When i get a loan, the cash appears in the asset while the debt appears in the liabilities on the balance sheet. The effect of this loan on NAV should be zero (asset - liabilities) from a mathematical standpoint. Any subsequent usage of the loan to generate value over the interest costs will of course be accretive to NAV down the road.

My shallow understanding of perpetuals is that these are debt that are classified as equity on the BS, some sort of financial engineering that we should beware whenever it is been used.

I took a quick look at SembCorp Utilties 1H15 results. It seems like share capital+reserves=5.65bil, while perps=0.8bil and non-controlling interests=1.79bil adds up to Net Asset=8.245bil. This means that the perpetuals are not classified like a simple loan (as i described earlier) on the BS.

For a conservative investor calculating the fundamentals from a purely mathematical standpoint, one should (1) take away the perps from the NAV (as you suggested) and (2) add 0.8bil into the gearing calculation
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(05-08-2015, 12:33 AM)weijian Wrote: For a conservative investor calculating the fundamentals from a purely mathematical standpoint, one should (1) take away the perps from the NAV (as you suggested) and (2) add 0.8bil into the gearing calculation
I do agree on your 2 points.
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Some announcements made by the company.
 

Sembcorp's first coal-fired power plant in India commences operation.


http://infopub.sgx.com/FileOpen/Sembcorp%20TPCIL%20Commences%20Full%20Commercial%20Operation-Final.ashx?App=Announcement&FileID=369416


 Sembsita pacific divested at s$350 million. This will par down their debt..



http://infopub.sgx.com/FileOpen/Sembcorp...eID=370194
 
Winston Churchill:-
“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”
"The farther backward you can look, the farther forward you are likely to see."
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Sembcorp to build S$557m power plant in Bangladesh

Sembcorp will own a 71 per cent stake in the project while a subsidiary of the Bangladesh Power Development Board will hold the remaining 29 per cent.

http://www.channelnewsasia.com/news/busi...56304.html
Winston Churchill:-
“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”
"The farther backward you can look, the farther forward you are likely to see."
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(28-09-2015, 09:36 PM)Art or Science Wrote: Sembcorp to build S$557m power plant in Bangladesh

Sembcorp will own a 71 per cent stake in the project while a subsidiary of the Bangladesh Power Development Board will hold the remaining 29 per cent.

http://www.channelnewsasia.com/news/busi...56304.html

Haha hope the power plant dun kena flooded! Big Grin
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http://www.straitstimes.com/business/com...tor=CS3-17

Sembcorp Ind - ex marine business, it appears that the utilities businesses that sci is in doesn't not have the stability and defensiveness that investors have perceived and expected...

Perhaps its the mkt that utilities that is working in where the privatisations have been done by a rich govt or one that is constantly and historically marred by red tapes
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Yeah, thats their biz model, selling water or energy plants/operations at a profit before going on to win other contracts. SCI is progressively diversifying their utilities business overseas, mainly i guess due to local competition (e.g. lower average spark rate) with more companies joining the fray..

My worry is their marine business, with brazil operations fraught with uncertainties (e.g. bribery and ongoing problems at Petrobas and brazil economy), and having spent billions building a new yard there. Oil prices are also down at the moment though its a matter of time before it goes back up, i think.

Vested little lah. - in fact its my very first stock purchase lah..
Winston Churchill:-
“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”
"The farther backward you can look, the farther forward you are likely to see."
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(30-10-2015, 09:12 PM)Art or Science Wrote: Yeah, thats their biz model, selling water or energy plants/operations at a profit before going on to win other contracts. SCI is progressively diversifying their utilities business overseas, mainly i guess due to local competition (e.g. lower average spark rate) with more companies joining the fray..

My worry is their marine business, with brazil operations fraught with uncertainties (e.g. bribery and ongoing problems at Petrobas and brazil economy), and having spent billions building a new yard there. Oil prices are also down at the moment though its a matter of time before it goes back up, i think.

Vested little lah. - in fact its my very first stock purchase lah..

KS Li paid big $ to get into regulated mkts like Australia / Europe for infrastructure...

http://www.valuebuddies.com/thread-6731-...#pid121520

Sing Inc sells out of regulated mkt to take risks in emerging markets...

Both equally strong financially but geographical focus vastly different...

I think I would prefer to go with KS Li as he has better track records that SW Fun mgrs it appears...
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