SINGAPORE (Feb 23): Sembcorp Industries says it has started the process for an initial public offering of Sembcorp Energy India on BSE and the National Stock Exchange of India, with the filing of a draft prospectus.
The announcement was made by Sembcorp after the completion of its strategic review which will reposition the utilities business as an integrated energy player and targets to double renewables portfolio.
The group also plans to divest a number of peripheral utilities assets. Over the next two years, this is expected to deliver estimated cash proceeds of up to $0.5 billion, in additional to potential proceeds from the proposed IPO.
A key focus of Sembcorp’s strategy is to reposition its utilities business to become an integrated energy player that will benefit from the global energy transition.
With the aim of having a balanced portfolio in developing and developed markets, the utilities business will focus on growing three business lines of Gas & Power; Renewables & Environment and Merchant & Retail.
The company also announced that it had entered into a conditional agreement to divest its municipal water operations in South Africa, as part of its geographical repositioning..
In its 4Q17 results filing, Sembcorp reported earnings fell 84.6% to $22.8 million from a year ago mainly due to losses reported by marine and lower contribution from utilities.
Besides the exceptional losses in 4Q17, 4Q16 had the benefit of $31.7 million recovery of development costs from its projects in Myanmar and Bangladesh.
Utilities and urban development were the key contributors to the group’s net profit.
The group reported 4Q17 revenue of $2.1 billion, 4.8% higher than 4Q16’s revenue of $2.0 billion. The increase was mainly due to higher turnover from Utilities, partially reduced by lower turnover from Marine.
Utilities’ turnover of $1.4 billion was an increase of $268 million, mainly due to higher HSFO prices and higher contribution from India. Marine’s turnover of $655 million was $175 million lower than last year, mainly due to lower revenue recognition for its rigs and offshore platform projects, including the effects of the sale of nine rigs and termination of three rig contracts with a customer.
4Q17 profit before tax and before net finance costs (PFO) of $109.8 million was a decrease of 62% over last year of $291.9 million.
For FY17, Sembcorp posted earnings of $230.8 million, profit from operations (PFO) of $795.3 million and turnover of $8.3 billion compared to $394.9 million, $909.0 million and $7.9 billion in FY16 respectively.
A final dividend of 2.0 cents per ordinary share is proposed. Together with an interim dividend of 3.0 cents per ordinary share paid in Aug 2017, this would bring the group’s total dividend for the year to 5.0 cents per share.
In a report following the announcement, Lim & Tan says given the focus of the strategic review is entirely on its utilities business, it believes there may be some short-term disappointment that no corporate action is done on Sembcorp Marine.
"Nevertheless, the stock’s valuation remains undemanding at 0.84 times book value. Hence, we recommend investors to buy on weakness," says the research house.
As at 11am, shares in Sembcorp are trading 4 cents lower at $3.23.
