Sembcorp Industries (SCI)
Sembcorp Industries (SCI), trading at \$5.58, has taken a strategic step to expand its footprint in the renewable energy sector. Its wholly-owned subsidiary, Sembcorp Energy Philippines, has entered into a share purchase agreement with CleanCurrent Renewable Energy Inc (CREI) to acquire 100% of CREI’s shares in Puente Al Sol for \$105 million. The acquisition will be funded through a mix of internal cash resources and external borrowings and is expected to be completed by the second half of 2025.
Puente Al Sol is developing a 96MW solar farm in Cadiz, Philippines, which is expected to begin commercial operations later this year. This acquisition underscores Sembcorp’s commitment to driving energy transition in the region. However, the company admitted that the acquisition will not significantly impact earnings per share and net tangible assets per share for the financial year ending December 31, 2025.
In 2025, Sembcorp missed one of its strategic targets of having 70% of its net profit come from sustainable solutions. This target was part of its energy transition goals set in 2021, with executive remuneration tied to its achievement. The stronger-than-expected growth in the gas business, which saw earnings almost triple since 2021, prevented the company from meeting this goal. Management has now excluded this metric from its next set of energy transition milestones for 2028. Despite this, Sembcorp remains focused on achieving 25GW of installed renewable capacity and reducing emissions intensity to 0.15 tonnes of CO2 equivalent per megawatt-hour by 2028.
Sembcorp currently trades at 10.5x forward PE and 2.0x PB, with a dividend yield of 2.5%. The consensus target price is \$6.80, representing a 21.9% upside from its current price. Analysts maintain an “Accumulate” rating on SCI, citing its scarcity premium and institutional demand for green and sustainable investing themes.
InnoTek
InnoTek, trading at \$0.43, has been navigating a transformative journey since selling its core disk-drive components business over 15 years ago. The precision components manufacturer pivoted to grow its small stamping business and has since diversified into promising sectors such as electric vehicles (EVs) and graphics processing unit (GPU) servers, which are riding the artificial intelligence (AI) wave. These efforts are now bearing fruit, with revenue for the first half of 2024 rising 30.9% year-on-year to S\$121.6 million.
The diversification strategy has been driven by growth in GPU server-related projects for AI applications, which now account for about 27% of InnoTek’s revenue, up from 14% a year earlier. The automotive segment remains its largest contributor, accounting for 33% of revenue, bolstered by the strong EV market in China. Other segments, including office automation, TVs and displays, also contribute significantly to its topline.
However, profitability has taken a hit, with net profit for H1 2024 slipping 8.3% to S\$3.2 million. This was attributed to extraordinary costs linked to shifting business strategies and geopolitical tensions driving the “China+1” manufacturing strategy. InnoTek has been strategically expanding its footprint in ASEAN countries, with facilities in Thailand and Vietnam, and plans to further invest in Malaysia due to its favorable infrastructure and skilled workforce.
Despite short-term challenges, the company remains optimistic about its long-term prospects. With a market capitalization of \$100 million, InnoTek trades at 0.6x its book value of 76 cents. Its strong balance sheet, featuring net cash of \$56 million, supports a sustainable dividend payout of 2 cents per share, translating to a yield of 4.6%. Analysts recommend an “Accumulate on Weakness” strategy, citing the company’s strong positioning for longer-term growth.
Other Highlights
Frasers Logistics & Commercial Trust
Frasers Logistics & Commercial Trust boasts a forward dividend yield of 7.57%. It remains one of the top dividend-yielding stocks in the market, making it attractive to income-focused investors.
Mapletree Pan Asia Commercial Trust
Mapletree Pan Asia Commercial Trust offers a forward dividend yield of 6.69%, positioning itself as a strong contender among REITs for steady income generation.
Jardine Cycle & Carriage
Jardine Cycle & Carriage stands out with a forward dividend yield of 7.73%, reflecting its robust profitability and shareholder returns.
Singapore Airlines
Singapore Airlines offers a forward dividend yield of 8.68%, supported by its strong operational recovery post-pandemic and consistent profitability.
Yangzijiang Shipbuilding
Yangzijiang Shipbuilding delivers one of the highest forward dividend yields at 10.22%, backed by its resilient order book and strong financial position.
Market Trends and Fund Flow Analysis
Institutional investors recorded a net sell of S\$449 million during the week of January 20, 2025, compared to S\$126.8 million a week earlier. Retail investors, however, were net buyers, with inflows totaling S\$217.5 million. The financial services sector saw the heaviest institutional selling, while REITs continued to attract retail inflows.
Among individual stocks, DBS was the top retail net buy at S\$106.7 million, while institutional investors heavily sold the same stock, recording a net sell of S\$211.2 million. CapitaLand Investment saw a retail net buy of S\$25.2 million but an institutional net sell of S\$35.1 million, reflecting divergent investment strategies between retail and institutional players.
Conclusion
This comprehensive analysis highlights the diverse opportunities and challenges faced by Singapore-listed companies. From Sembcorp Industries’ renewable energy pivot to InnoTek’s diversification into AI and EV sectors, these companies are navigating dynamic market conditions with strategic initiatives. The recommendations provided by Lim & Tan Securities offer valuable insights for investors seeking to capitalize on long-term growth opportunities in these stocks.
