If there are some blue chip stocks that I would snap up in a further draw down, Sembcorp Industries (SCI) would be one of them.
For a bit of its total return history you can view it here.
Sembcorp is undergoing some sort of mini transformation. It owns 60% of SGX listed Sembcorp Marine (SMM), which builds oil rigs and drill ships. This have become its main profit generator and made it a darling among speculator.
In recent years, Sembcorp have aggressively try to build up its utilities portfolio. What happens is that SMM generates the cash flow, pays out the dividend to SCI, SCI leverages on this to build and develop utilities around the world.
Utilities are probably more recurring in cash flow, and perhaps they are preparing for the inevitable when the oil rig craze die down.
The recent 2 quarters have evidently show the cash flow from the utilities coming in. So much so that its full year utilities profit should be able to pay for its existing dividend. The dividend payout ratio is around 30%.
That is rather good. And probably more utilities coming online.
Debt wise we know that that SMM is net cash, this utilities assets is estimated to amount to 3.3 bil and their net debt is 1.1 bil. This make their debt to asset ratio of 33%. This is much lower than many utility and infrastructure plays such as MIIF, SP Ausnet and Cityspring on my dividend stock tracker which typically hovers around 50-60%.
Its trading at a PE of 10 times. really undemanding for a blue chip. Although the dividend yield is low, we view SCI as a growth stock, which will give the odd special dividend.
The upside of this switch to utilities, is that in the future, these utilities may be spin off into infrastructure or utility trusts, which SCI will further stand to benefit from.
Do a bit of homework into this to see if you agree with me.
I have added SCI to my dividend stock tracker as well, so you guys can tune in daily to its change in valuation and yield.
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