Should you trade Sembcorp Industries shares?
The energy company’s shares have risen to a 4.5-year high. Is it a good time to buy the stock now?
- Sembcorp Industries Ltd (SGX: U96) share price rallied to S$3.50 on Tuesday (7 September 2022)
- The group has proposed the complete sale of Sembcorp Energy India as part of its transition toward becoming a greener company
- UOB’s equity research team kept a ‘buy’ call and price target of S$4.10 following the announcement
- Keen to trade Sembcorp Industries shares? Open an account with us to start today.
Sembcorp Industries stock price: what’s the latest forecast?
Sembcorp Industries (SCI) shares jumped up over 5% after it announced the sale of its India coal power unit.
The blue-chip stock has a consensus rating of ‘outperform’ and average price target of S$3.23, based on the latest analyst sentiments published by SGX StockFacts.
United Overseas Bank’s (UOB) equity research team wrote on 6 September 2022 that it views the sale of SCI’s India power plants ‘in a favourable light given the strategic imperative for SCI to progress towards being a greener company’.
The acquisition price (of S$2.1 billion) implies an annualised 2022 full-year price-to-earnings (PE) ratio of 10.2 times, which the analysts view ‘as largely fair given the current market environment around coal-related assets’.
UOB maintained a ‘buy’ call and price target of S$4.10 for SCI shares. This is based on a target PE multiple of 13.6 times.
‘SCI remains our top pick in Singapore for the quality of its earnings as well as its growth prospects in the near to medium term,’ UOB added.
Sembcorp Industries proposes sale of India coal-powered plants
On Tuesday, the group announced that its wholly-owned subsidiary Sembcorp Utilities (SCU), has entered into a share purchase agreement to sell 100% of the shares of Sembcorp Energy India Limited (SEIL) to Tanweer Infrastructure Pte. Ltd.
The proposed sale, which is for a consideration of 117 billion Indian Rupees (approximately S$2.1 billion), will result in the deconsolidation of SEIL from SCI, with Tanweer Infrastructure becoming the sole shareholder of SEIL on completion.
Upon completion of the sale, 51% of SCI’s energy capacity will be renewable energy, up from 43% as of June 2022. On a pro forma basis, SCI’s share of net profit from its sustainable solutions portfolio for the first half of 2022 will increase from 25% to 31%.
The purchase consideration amount is at an implied price/book multiple of 1.0 times. SCI stated that it ‘believes shareholder value will be preserved through the proposed sale’.
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