Sembcorp Industries Ltd (SGX: U96) was incorporated and merged from Singapore Technologies Industrial Corporation and Sembawang Corporation in 1988.
To date, the Group is a Singapore-listed company with total assets of more than S$13 billion. Sembcorp Industries Ltd is part of Singapore’s list of Blue Chips.
The Group is primarily involved in 3 main business segments:
SembCorp Utilities contributes close to half of the Group’s total revenue with the latest 9M2014 accounting S$3.68 billion. With facilities generating electricity of >7,000 MW, the Group develops, owns and operates energy assets with presence in 14 countries, focusing not only in Asia but in emerging markets such as the Middle East & Africa. Some of the Group’s North Asia projects include the first 660 MW power plant in India to be completed by end-2014 and a signed agreement for 2 power plants in Chongqing, totalling 1,620 MW. In addition, > 3,000 MW of power capacity is expected to come on-stream between 2014 to 2016.
The Group holds a 60% stake in SembCorp Marine, a global marine and offshore engineering group which specializes in a full range of shipbuilding, rig building and offshore engineering & construction. The Marine business currently has as a net order book of S$12.6 billion with completion & deliveries stretching into 2019. This includes a total of S$4.2 billion in contracts secured since the start of 2014. As at 5 Nov 2014, breakdown of contracts are as follows:
Semi-submersible rigs : 7%
Jack-up rigs: 15%
Conversion/offshore & platforms: 28%
SembCorp Development Ltd is a leading developer with >20 years experience undertaking master planning, land preparation and infrastructure development in Asia. Its geographical presence expands to Vietnam, China and Indonesia.
Sembcorp Industries Ltd Business Outlook
The recent 9M2014 Group turnover showed a 5% increase to S$8.23 billion, with net profits declined 6% to S$560 million. A drag on utilities net profits was mitigated by its other business segments. Competition in the local power market continues to be intense given new entrants to the industry. However, contribution from the Group’s overseas utilities business is expected to grow.
The Marine business continues to see pressure on its profit margins as Chinese and Korean shipyards are getting increasingly competitive on pricing.
Value in Action
SembCorp Industries Ltd currently trades at 10.6x of T12-EPS. Its ROE has been declining from 23% in FY2009 to 17% in FY2013 due to increased competition for both Utilities and Marine businesses. However, order book visibility still remains strong for the Group. Could it be a good time to look at the company?
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All views and opinions articulated in the article were expressed in Willie’s personal capacity and do not in any way represent those of his employer and other related entities. Willie does not own any shares in the companies mentioned above.