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3 Signs SembCorp Industries Limited’s Business May Be Improving

Royston Yang

SembCorp Industries Limited (SGX: U96), or SCI, is a leading energy, marine, and urban development group that operates in many worldwide markets. SCI has total assets worth over S$24 billion and employs over 7,000 employees.

SCI’s marine division was negatively affected by the collapse in oil prices back in 2014, while utilities have also struggled with over-supply in Singapore and other countries, resulting in both falling profits and declining dividends. SCI’s share price has tumbled from S$5.00 back in October 2014 to the current S$2.10, for a fall of almost 58%.

However, the group has been actively taking steps to turn its business around, and here are three signs that may show indications of improvement over at SCI.

1. Solar-powered offices

SCI and global bank UBS have signed a long-term solar energy deal where SCI will provide locally-sourced renewable power to support UBS’s Singapore operations over the next 10 years. This will be accomplished through the sale of renewable energy generated by more than 15,000 offsite rooftop panels totaling 6.3 megawatt-peak in capacity.

This agreement taps on SCI’s growing renewable energy footprint and is another step forward for the group in improving its sustainability footprint, along with an ambitious target to double its global renewables portfolio and reduce its greenhouse gas emissions intensity by 22% by 2022.

2. Smart energy solutions to Vietnam

In late September, SCI signed a joint venture agreement with Becamex IDC Corporation and Vietnam Singapore Industrial Park (VSIP) to introduce a new generation of sustainable smart energy solutions to Vietnam. Under this collaboration, SCI will make its maiden entry into Vietnam’s renewable energy sector and will work with its partners to develop rooftop solar facilities in other VSIP-integrated townships and industrial parks.

3. Divestment of commercial construction business

In early October, SCI announced the divestment of its commercial construction business to Chip Eng Seng Corporation Ltd (SGX: C29) for S$49.9 million. This is in line with the group’s strategy to unlock value and recycle capital as it works toward its goal of becoming a global integrated energy player.

Growing steadily

Though contract values were not stated in the instances above, it is clear that SCI is gaining traction in growing its renewable energy portfolio. By snagging a reputable global bank such as UBS, SCI is building up a portfolio of blue chip clients. The collaboration to expand into Vietnam also marks the group’s first foray into the country, with strong potential for more follow-up contracts to install more solar panels. By recycling capital, the group is working on keeping its structure lean in order to focus its efforts and capital on projects that matter. If these efforts pan out, investors can look forward to better numbers in the years ahead.

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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies mentioned.

Motley Fool Singapore 2019