Sembcorp Industries Announced a Strategic Reorganisation: Can its Share Price Hit a New High?

The  blue-chip  utility and urban development specialist saw its share price soar 54% in 2023 and another 4% last year.

Year-to-date, shares are up 10.3% and just touched a 52-week high of S$6.45, close to its all-time high of S$6.50 back in 2007.

SCI recently released its 2024 earnings which saw management more than double its final  dividend  from S$0.08 last year to S$0.17.

Along the way, the group also announced a strategic reorganisation to accelerate its growth.

Can SCI&rsquo s share price go on to hit new highs? Let&rsquo s find out.

Appointing managers for key business lines

SCI has three key divisions &ndash gas and related services, renewables, and integrated urban solutions.

Koh Chiap Khiong was appointed as a the president and CEO of the gas and related services division, and he will head the energy transition portfolio in Singapore comprising solar, energy imports, and low-carbon solutions.

The renewables division was further subdivided into two regions, East and West, each with its president and CEO.

Alex Tan heads the east sub-division and will lead the business in China and Southeast Asia.

Vipul Tuli is appointed as the president and CEO of the West sub-division and will lead the business in India and the Middle East.

He will also be the CEO of SCI&rsquo s Hydrogen business and will be in charge of the group&rsquo s global hydrogen renewables business.

Finally, Eugene Cheng, group CFO of SCI, will also take up the position of president and CEO of integrated urban solutions.

Promising growth engines

Management identified three key growth engines to power SCI&rsquo s growth in the years ahead.
The gas and related services division saw its net profit before exceptional items (EI) rise threefold from S$245 million in 2020 to S$727 million in 2024.

This division will deliver a comprehensive suite of solutions for customers&rsquo energy requirements.

Over at renewables, SCI will make disciplined investments to grow its gross installed capacity.

Net profit before EI for this division grew nearly fourfold from S$46 million to S$183 million from 2020 to 2024.

As for integrated urban solutions, the refreshed strategy implemented in August last year led to a turnaround, with net profit before EI rising from S$113 million in 2020 to S$169 million by 2024.

This division possesses water and renewable energy capabilities to deliver low-carbon solutions for clients.

Regional expansion for gas services

Drilling down into each division, gas and related services aims to lead the region&rsquo s energy transition while generating strong returns.

It has four energy switches &ndash natural gas, renewables, regional import, and low-carbon, and will pursue new power and gas projects in the region.

Senoko Energy will be optimised to serve high power demand sectors while SCI&rsquo s various gas offtake agreements will ensure a stable source of recurring income.

The division&rsquo s objective is to achieve more than 5% earnings compound annual growth rate (CAGR) accompanied by best-in-class return on equity (ROE).

Scaling up its renewables portfolio

As for renewables, the division will accelerate growth through acquisitions outside of Singapore while establishing strategic partnerships.

The East sub-division plans to target geographies with strong power demand such as data centres.

It will also leverage China&rsquo s procurement advantages to maximise the division&rsquo s cost efficiency.

For the Middle East, the aim is to co-develop renewables capacity and form EPC (engineering, procurement, and construction) partnerships.

New growth regions for integrated urban solutions

SCI has plans to accelerate growth in this division by driving faster land sales and capturing demand from high-value and fast-growing industries such as data centres.

The idea is also to establish a presence in high-growth regions such as India as part of its regional push.

This division is aiming for mid-teens earnings CAGR with ROE exceeding 10%.

Get Smart: Promising, but needs time

SCI&rsquo s reorganisation sounds exciting and shareholders can look forward to reaping the benefits of these initiatives.

However, do note that the execution of these ideas requires time.

Hence, it may take a while for the financial results to reflect management&rsquo s efforts.

Meanwhile, investors can look to SCI as a solid growth and yield play as the utility specialist embarks on a multi-year growth journey.

Sembcorp Environment has been purchased by TBS Energi Utama, a waste management company listed on the Indonesian Stock Exchange. Photo: SembcorpSembcorp Industries (Sembcorp) has completed the sale of the entire shareholding in its subsidiary Sembcorp Environment (SembEnviro) to SBT Investment 2, a wholly-owned subsidiary of TBS Energi Utama (TBS). 

This follows the  Nov 8, 2024 news  when Sembcorp first announced its intention to sell 100% of its shares in SembEnviro for a total consideration of $405 million.

Then, it represented a 43% premium over the book value and net asset value of SembEnviro and its subsidiaries (SembEnviro group) as at June 30, 2024, after taking into account the estimated pre-completion dividend to be distributed from SembEnviro group.

 

TBS manages a waste management portfolio in Singapore and Indonesia, and is listed on the Indonesian Stock Exchange. In Singapore, it owns and operates Asia Medical Enviro Services which specialises in biohazardous and medical waste treatment services. 

TBS says that it is working to establish a regionally integrated waste management platform with presence in Indonesia and Singapore across medical, industrial and domestic waste management, fostering sustainable waste solutions for both cities and industries.

Sembcorp says that it will provide up to 18 months of support services to SembEnviro and its subsidiaries and will also permit limited use of the SembEnviro name and its trademarks during the transitional period.