Sembcorp Industries

[winston]

Hi GM89,

This counter has also been on my watchlist. However, I have not been able to find a convincing catalyst.

Do you see any convincing catalyst for their businesses ?
1) Oil Rigs - within or above expectation ?
2) Utilities - should be quite stable
3) Oman Water Project - execution risk ?
4) Gallant - within or above expectation ?

Their PEG is also not that attractive so one may have to use SOTP to justify the valuation for this company. And I'm not too good with calculating SOTP as it depends on the assumptions used ..

Thanks and take care,
Winston

[grandmaster89]

Hi Winston,

Sembcorp is a strong local company with excellent balance sheet (net cash) and positive operating and free cash flow.

1) Oil Rigs - The price of crude oil is rising making exploration attractive once more. Petrobas recently discovered substantial presence of crude oil off Brazil. They will be handing over contracts to build 28 oil rigs over the next 5 years. I expect SembCorp to benefit since it is the world second largest rig builder. They mentioned that their ship repairs operations remain stable with repeat customers. They are building a marine facility in India. I expect their expansion into India will be reap benefits in the long term since India is Asia largest iron ore exporter and soon to be Asian giant.

2) Utilities - should be quite stable. Only their UK operations is stumbling due to weak Pounds and less clients but they are confident that they can find new clients. Interestinly they have substantial presence in the water industry. They own and operate New Water in Singapore and plans to triple its output when it is fully operational next year. They also run wastewater treatment plants in China. Power plants wise, I expect outputs to be stable though they will increase their import of Natural Gas by 25%

3) Oman Water Project - Possible execution risk. But this is not their first Mid East water foray. They have a 40% stake in a desalination plant in UAE which is one of the largest in the world.

4) Gallant - I don't think this have much impact in Sembcorp performance. Utilities and Marine business makes up 92% of its revenues.

5) Environment - Lets not forget that Sembcorp is Singapore biggest waste-collecting/treatment and recycling company. Extremely stable and necessary bit of business.

PE wise, it is around 11. Not extremely undervalued but with its exposure to green tech, water and oil rig industry, it makes it an exciting play. Water stocks are trading at extremely high valuations while oil rigs are cyclical play. It is an explosive mix of both.

Cheers!

[winston]

Hi GM89,

Thanks for your kind comments on the company.

I will certainly watch this counter closer.

Thanks and take care,
Winston

[grandmaster89]

But I am not too sure whether is it safe to accumulate STI component stocks when the STI is at the brink of 2900???

[winston]

But I am not too sure whether is it safe to accumulate STI component stocks when the STI is at the brink of 2900?

Hi GM89.

Ha Ha ... that is the $64m question.

Again. I still cant find any new catalyst that would move things from here ...

Take care,
Winston

[grandmaster89]

But I am not too sure whether is it safe to accumulate STI component stocks when the STI is at the brink of 2900?

Hi GM89.

Ha Ha ... that is the $64m question.

Again. I still cant find any new catalyst that would move things from here ...

Take care,
Winston

My personal views -

The main catalyst people are punting on are :

a) Winning Petrobas oil rigs contracts next year
b) More water-related contracts

[winston]

Not vested. From DMG:-

Sembcorp – Singapore remains an important growth market for Sembcorp, even as it expands overseas, says president and CEO Tang Kin Fei.

The group is planning a second combined cycle/cogeneration plant here as a second natural gas supply deal with Indonesia kicks in next year. Sembcorp is also not averse to any joint venture possibilities with smaller power players here, he added.

'We are in process of engaging a consultant to do a concept study including front-end engineering and design, and after costing studies, we can have a more conclusive position,' he said of its planned second plant investment which will potentially cost hundreds of millions of dollars.

The study will take about six months, he added. Disclosing this in an interview in Oman where Sembcorp broke ground last Wednesday for its US$1 billion Salalah power and water project, Mr Tang said that one of the factors pushing the Singapore investment is competition from the three biggest generating companies here, now in foreign hands. The trio together account for 80-90 per cent of Singapore's electricity generation.

(Sources: Company, SGX, Business Times, Dow Jones)

[kennynah]

this is a poitive move by sembcorp....they should be emulated in principals by the singapore private sectors...of cos, not easy... but easy business is usually hardly profitable for long...

[Blackjack]

Just noticed the $5.58 tp by CIMB... finally my stuck holding of 1 lot may see some light???

[millionairemind]

May 10, 2010, 8.23 am (Singapore time)

Sembcorp Q1 profit up 19% to $158.8m

By BERNICE BONG

SINGAPORE - Sembcorp Industries reported a 19 per cent year-on-year increase in net profit to $158.8 million in the first quarter ended March 31, 2010, boosted by gains from its oil rig building and utilities businesses.

Turnover was $2.4 billion, up 12 per cent while earnings per share was 8.91 cents, compared to 7.52 cents in the previous year.

The group's marine contribution to net profit grew 23 per cent to $91.1 million, while utilities’ net profit increased 10 per cent to $56.2 million.

Sembcorp’s return on equity was a healthy 17.5 per cent, while cash and cash equivalents stood at a strong $3.0 billion.

Looking ahead, the company said its utilities operations is expected to remain faily steady this year and its marine business is projected to achieve satisfactory results. Its industrial parks business is expected to perform better. Turnover from the industrial parks fell 7 per cent to $3.5 million in the first quarter.

The company will pay a final dividend of 15 cents per share for FY2009 on May 12, 2010.