Sembcorp Industries - CGS-CIMB Research 2020-06-09: Parting Ways With Sembcorp Marine

SEMBCORP INDUSTRIES LTD (SGX:U96) | SGinvestors.io SEMBCORP INDUSTRIES LTD (SGX:U96)

Sembcorp Industries - Parting Ways With Sembcorp Marine




Recapitalising rights in Sembcorp Marine, no cash outlay from Sembcorp Industries



What do Sembcorp Industries shareholders get?

  • Our estimated proforma excluding perps BV for Sembcorp Industries for FY20F is at S$3,726m, or S$2.09 per share. We believe market could ascribe a 0.6x P/BV band for Sembcorp Industries stub to account for its energy and urban development business to S$1.25 per share. Although we estimate that forward ROE to be about 8% for FY20F, execution and confidence in management could take time to rebuild.
  • In addition, we assume Sembcorp Marine's share price to slide by c.30% from last closing price (S$0.85) to S$0.68 as market could view the rights as highly dilutive, resulting in Sembcorp Marine’s TERP of S$0.27.
  • We also use an average of 459 distributed shares in Sembcorp Marine per 100 Sembcorp Industries shares as a base to calculate the Sembcorp Marine shares to be distributed to Sembcorp Industries shareholders.
  • In total, Sembcorp Industries shareholder could get S$2.49 based on our assumptions above. See Figures 1 and 2 in PDF report attached below for calculation.


How about existing Sembcorp Marine shareholders?



Upgrade Sembcorp Industries on valuations with Target Price of S$2.49






LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2020-06-09
SGX Stock Analyst Report ADD UPGRADE HOLD 2.49 UP 1.76



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