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Sembcorp Industries stages rebound–A real long term utilities play

I thought I may have missed out on Sembcorp Industries for the second time when IT rebounded from a low of $4.80 to $5.15.

People may prefer Sembcorp Marine since it distributes a larger dividend and have a higher ROE.

To me, ROE and margins that are huge are only good to you if you can protect yourself from competition. Most of the time a company will find it difficult.

Yangzijiang, other China and Korean shipyards are starting to develop capabilities of building rigs and customers are getting demanding since there are more bidders and economic climate are not so good.

As such, the contracts gotten now are not as fat. A large part of Sembcorp Marine and Keppel Corps’ share valuation is due to their Rig building and similar capabilities.

We should be valuing future cash flow. As such I see a recurring utilities revenue to be more attractive.

Granted this article on SCI, is showing Keppel always competing with SCI.

Buying SCI now is akin to investing in a utility with 20-30 year cash flow.

The company has moved into Oman through a venture and expanded into renewable energy with the acquisition of a stake in a wind farm in China.

Sembcorp is developing a coal-fired power plant in India under a partnership, and may expand its utilities business in the country by adding more capacity or acquire distressed assets, Tang said, declining to give further details.

In Myanmar, Tang said he’s keen on developing so-called townships, where Sembcorp could build industrial parks and apartments, before branching out to the supply of power and water. “Although there’s a lot of demand there, there are not a lot of elements in place,” he said.

In Singapore, Sembcorp is building its second combined- cycle gas turbine cogeneration plant to increase its power capacity to 1,215 megawatts from 815 megawatts. The facility, which could produce 400 tons per hour of steam, will start operations at the end of 2013, the company said.

Sembcorp also started operations on its biggest industrial wastewater treatment plant in Singapore to treat as much as 9,600 cubic meters of water a day, it said.

Singapore’s power supply is expected to grow as much as 30 percent next year as new projects start operations, which may narrow margins for companies such as Sembcorp, according to DBS Vickers Securities in Singapore. Tuas Power Ltd., Keppel Corp. (KEP) and GMR Infrastructure Ltd. are expected add capacity next year, the brokerage said earlier this month.

Sembcorp also supports the liberalization of power supply to homes in Singapore, Tang said, as it’s in a “good position” with a ready customer base through its waste-collection operation in the city state.

[Sembcorp Mulls Acquisitions in Migration to City: South East Asia]


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Saturday 1st of December 2012

Will it be a good to add SCI? Thinking of getting it at around $4.90-5 if it pulls back from 5.15.


Monday 3rd of December 2012

hi James i was aiming for $4.60 haha.


Saturday 1st of December 2012

Any consideration on dividend yield for Kep Corp and Semb Corp?


Monday 3rd of December 2012

hi uncle CW, i think i like Sembcorp for the div that could grow, at the same time not very sanguine on the part where a large part of valuation is due to the rigs.

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