Sembcorp Industries - Phillip Securities 2020-09-17: Completes Demerger Of Sembcorp Marine

SEMBCORP INDUSTRIES LTD (SGX:U96)

Sembcorp Industries - Completes Demerger Of Sembcorp Marine

Distribution-in-specie of the capital of Sembcorp Marine (SGX:S51) to all Sembcorp Industries (SGX:U96) shareholders completed.
Entitled Sembcorp Industries shareholders will have received 4.911 of Sembcorp Marine shares for every 1 Sembcorp Industries shares held, amounting to about S$0.89, based on 10 September share price.

We maintain our BUY recommendation with an unchanged target price of $1.75 on standalone Sembcorp Industries (ex. Sembcorp Marine).

Following the issue of 10,462,690,870 Sembcorp Marine rights shares to entitled Sembcorp Industries shareholders on 11 September, the proposed distribution and demerger has been completed. Entitled Sembcorp Industries shareholders will have received their entitlement of 4.911 Sembcorp Marine shares for every 1 Sembcorp Industries share held, amounting to approximately S$0.89 (4.911 x S$0.182). We arrived at this by taking the number of Sembcorp Marine shares distributed for every 1 Sembcorp Industries shares held and multiplied this by the closing price of the Sembcorp Marine shares as at 10 September 2020 of S$0.182, which is the date before the distribution to Sembcorp Industries holders.
This means that the ex-distribution price of Sembcorp Industries following the distribution is approximately S$1.02 (S$1.91 - $0.89). This is arrived at by subtracting the total value of Sembcorp Marine shares received by Sembcorp Industries shareholders with the closing price of Sembcorp Industries on the 10 September, the date before the distribution.
In total, Sembcorp Industries shareholders could realise a total of $2.64/share (S$1.75 + (4.911 x S$0.182)).

We are positive on the Group’s outlook. Following the deconsolidation of Sembcorp Marine, we think Sembcorp Industries will see a potential positive re-rating as the Group’s operating metrics improve in Fy21e from improving energy demand.

We maintained our BUY recommendation on Sembcorp Industries following the distribution-in-specie of the capital of Sembcorp Marine to entitled Sembcorp Industries shareholders. Our target price of S$1.75 for standalone Sembcorp Industries (ex. Sembcorp Marine) is pegged to a P/BV of 0.7x FY21e, which is a slight discount to their 10-year historical average equity value (ex. Sembcorp Marine).
See Sembcorp Share Price; Sembcorp Target Price; Sembcorp Analyst Reports; Sembcorp Dividend History; Sembcorp Announcements; Sembcorp Latest News.
We expect Sembcorp Industries to see improved operating metrics with the Group expected to generate positive operating CF of $854mn for FY21e and return on equity of 7.6% for FY21e.

Terence Chua Phillip Securities Research | https://www.stocksbnb.com/ 2020-09-17

SGX Stock Analyst Report BUY MAINTAIN BUY 1.75 SAME 1.75