Sembcorp Industries share price to smash $3.00 with India IPO?

On 16 September 2020, I invested in Sembcorp Industries (SCI). My entry price for Sembcorp Industries share price was $1.35. The decision to enter this counter was after my research done for my previous article “Sembcorp Industries share price to hit $5 after demerger?”

In my previous article, I shared that the catalyst for Sembcorp Industries share price is not the demerger of the loss-making Sembcorp Marine. To truly unlock the full value of Sembcorp Industries share price, the management must continue its effort in recycle capital through its energy and urban assets. And one of the major catalysts for Sembcorp Industries share price is the listing of the India business unit, Sembcorp Energy India Ltd (SEIL).

Sembcorp Industries share price

According to a report written by Phillip Capital written on 9 September 2020, the estimated value of the listing is worth a staggering $1.8 billion. However, given the current climate, the IPO value should be at most $1.5 billion. With such tremendous catalyst, Sembcorp Industries share price could potentially hit $3.00. After all, Sembcorp Industries share price is traded at $2.13 as of 16 September 2020 post-SCM demerger ($1.34 + (4.911 x $0.16)).

According to the SEIL recent annual report, the total assets amounted to INR 268 billion while total liabilities amounted to INR 168 billion. Thus, the book value for SEIL is INR 100 billion, which translated to Singapore dollars, amounted to $1.8 billion. Based on the current climate, if Sembcorp does list SEIL, I applied discounted valuation of 45% and derived the book value of $1 billion.

Will Sembcorp Industries share price soar with the listing of SEIL? Certainly, the listing of SEIL is not without basis. In 2018, Sembcorp Industries tried to list the business unit but had to postpone it because SCI bought over the remaining stakes of SEIL in December 2019. According to India regulations, the change in capital structure would require a re-file of IPO.

Given the recent slew of divestment activities aimed at unlocking value of Sembcorp Industries share price, the IPO of SEIL should be imminent. Against this backdrop, I envision Sembcorp Industries share price to be bullish in the coming months.

Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. I am vested in this counter. Thus, the views expressed in this article may be biased.

Unlocking value of Sembcorp Industries share price

Sembcorp Industries share price has been buoyant following a series of asset recycling activities. In September 2020, the Group divested 32% stake in joint venture company Shenzhen Chiwan Sembawang Engineering Co (CSE) for $29.4 million. In July, the Group divested 100% of their interests in the water business in Chile for $53.6 million.

In July 2020, the Group sold a 30% equity interest it holds in Sino-Singapore (Chengdu) Innovation Park Development Co. (SSCIP) for $138.3 million. In 2019, the Group also divested the Xinmin Municipal Water in China and the commercial construction business of Sembcorp Design & Construction (SDC) in Singapore. Despite these efforts, Sembcorp Industries share price had been bearish, presumably due to losses incurred by its oil and gas businesses.

To revive Sembcorp Industries share price, I think the next move by the management should be the blockbuster IPO of its asset, SEIL. The fact that the Group increased its stake in SEIL to 100% means that the management is [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: September 18, 2020 — 6:28 pm

7 Comments

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  1. On 8 Sep, it closed at $1.91. And as of 16 Sep, it’s equivalent of $2.27. It’s already about 20% up. I will wait and see for a while.

  2. Hi Leo,

    Yeah, something brewing for SCI.

    Regards,
    Gerald
    https://sgwealthbuilder.com

  3. What is the the book value of the Indian business ? If the BV is already 1 bil , not much upside gain right ?

  4. need to compare the IPO value with the book value already in SCI. if the difference is not a lot, then the gain from IPO may not be that attractive.

  5. Hi Investor,

    The answer (book value of SEIL) is contained in the article.
    You may want to subscribe as member to unlock the full article.

    Regards,
    Gerald
    https://sgwealthbuilder.com

  6. Hi Mystery Investor,

    Not sure if this is the correct way to value an IPO of a company’s asset.

    Regards,
    Gerald
    https://sgwealthbuilder.com

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