facebookYour 60-Second Analysis of Sembcorp Industries Limited (SGX: U96) Shares




Your 60-Second Analysis of Sembcorp Industries Limited (SGX: U96) Shares

profileSudhan P


In this series, we will feature one Singapore-listed company each time as a quick guide to everything you should know about it in 60 seconds.

In this instalment, we have Sembcorp Industries Limited (SGX: U96), a well-known conglomerate in Singapore. Previously, we featured property giant CapitaLand Limited (SGX: C31).

What’s Sembcorp Industries’ Business About? 

Sembcorp Industries has three main business segments: Energy, Marine, and Urban.

Under the Energy business, Sembcorp Industries makes money from developing, owning and operating energy and water assets. Its portfolio includes thermal power plants, renewable wind and solar power assets, and energy-from-waste facilities.

Under the Marine segment, Sembcorp Industries builds rigs and floaters, as well as performing repairs and upgrades of vessels, marine and offshore structures. It also has capabilities in offshore platforms and specialised shipbuilding. Sembcorp Industries prides itself in being a world leader in offshore and marine engineering.

The Marine division offers solutions across the offshore and marine value chain, both within and beyond the oil and gas sector. The yard facilities are located in Singapore, Indonesia, Norway, the UK, the US and Brazil.

Sembcorp Industries’ revenue from the Marine division comes from its approximately 61% stake in Sembcorp Marine Ltd (SGX: S51).

Last but not the least, the Urban segment owns, develops, markets and manages integrated urban developments. These include industrial parks as well as business, commercial and residential spaces mainly in Vietnam, China and Indonesia.

Sembcorp Industries’ Financial Highlights 

Over the past five years, Sembcorp Industries’ revenue has grown slightly, but its net profit has tumbled:

(S$' million)
10,8959,545 7,9079,02611,689
Net profit
(S$' million)
Free cash flow
(S$' million)
(29) (12)1,1321,124948
Return on equity (%)

The prolonged downcycle in the offshore and marine sector is the main cause for Sembcorp Industries’ net profit slowdown.

In its 2019 third-quarter earnings release, Sembcorp Industries said that “the market environment continues to be challenging for the offshore and marine sector and Sembcorp Marine is expecting full year losses”.

Sembcorp Industries’ return on equity (ROE) has also fallen over the years with the decline in net profit. ROE reveals management’s ability to grow shareholders’ capital.

Sembcorp Industries’ Dividend History

Sembcorp Industries’ historical dividend trend is not a pretty sight.

With the slowdown in the marine sector, Sembcorp Industries’ dividend has fallen over the years as well.

 Total dividend per share
(Singapore cents)

Pictorially and over the slightly longer term, the following is how Sembcorp Industries’ historical dividend payment looks like:

Source: Sembcorp Industries investor relations site

Major Risk for Sembcorp Industries to Take Note Of

The oil price crash of 2014 has caused many companies involved in the oil and gas sector to suffer. Sembcorp Industries, through its investment in Sembcorp Marine, has not been spared either, causing its bottom-line to suffer heavily as seen earlier.

More recently, the Wuhan coronavirus scare, on top of affecting the stock market, has sent oil price tumbling too, with Brent crude oil falling below US$55. On 3 February, oil hit lows not seen for the last 13 months.

As mentioned earlier, Sembcorp Marine is expecting full-year losses due to the prolonged downturn in the oil and gas sector. Adding on to its woes is the Wuhan virus outbreak. If the oil price doesn’t recover, Sembcorp Industries’ Marine sector could see more pain.

Sembcorp Industries’ Share Price and Valuation

Sembcorp Industries’ has not performed well in the last five years with its share price plunging by around 49%.

At Sembcorp Industries’ share price of S$2.12, it has a price-to-earnings (PE) ratio of 10 and a dividend yield of 1.9%.

The PE ratio may look low as compared to the broader Singapore market, but potential investors should discern whether it makes sense to own a stake in a company that’s struggling to grow.

Want to Discuss Further?

Why not check out our Seedly Community and participate in the discussion surrounding stocks like Sembcorp Industries (SGX: U96) and many more!

Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. 

About Sudhan P
It isn't fair competition when only one company in the world makes Monopoly. But I love investing in monopolies. Before joining the Seedly hood, I had the chance to co-author a Singapore-themed investment book – "Invest Lah! The Average Joe's Guide To Investing" – and work at The Motley Fool Singapore as an analyst.
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