Overview: Sembcorp Industries (SCI) reported better-than-expected 2024 results, showcasing the resilience of its business model amidst challenges in gas services and renewables. Despite a 9% year-on-year drop in revenue to S$6.4 billion and a 3% decline in EBITDA to S$1.7 billion, the company maintained a stable net profit before exceptionals of S$1.02 billion. This was achieved due to S$169 million in Deferred Payment Note income and contributions from its newly acquired stake in Senoko Energy.
Dividend and Financial Highlights: A significant highlight was SCI’s generous dividend payout. The company proposed a final dividend of S$0.17 per share, raising the total 2024 dividend to S$0.23 per share compared to S$0.13 in 2023. This represents a 40% payout ratio, a marked increase from the average 29% in 2021-2023. Management emphasized the sustainability of this higher payout, reflecting strong cash generation across its business segments.
Strategic Reorganization and Leadership: SCI introduced a new leadership structure aimed at driving consistent earnings growth and executing its transformative strategy. The company remains confident in its medium-term growth prospects in Singapore and overseas markets.
Renewables Segment: SCI’s gross renewables capacity stood at 17.0 GW by the end of 2024. Despite challenges such as curtailment in China and lower wind speeds in India leading to a 9% decline in net profit to S$183 million, the company reiterated its target of achieving 25 GW by 2028. SCI expects regulatory developments in China to alleviate curtailment risks, while increased tariffs in India are expected to offset lower wind speeds.
Integrated Urban Solutions (IUS): The IUS segment led growth with a 40% year-on-year increase in net profit before exceptionals to S$169 million. This was driven by strong land sales in Vietnam and Indonesia. SCI secured three new investment licenses in Vietnam, expanding its land bank and setting the stage for future growth. The company also anticipates a S$100 million gain from the upcoming sale of SembEnviro.
Gas and Related Services: Although impacted by planned maintenance and lower pool prices in Singapore, SCI’s gas segment showed resilience, with only 1% exposure to the spot market. Following the acquisition of a 30% stake in Senoko Energy, SCI aims to consolidate its shareholding and capitalize on its strategic location.
Balance Sheet and Debt Management: Gross debt rose to S$8.7 billion by the end of 2024, primarily due to renewables acquisitions and capacity growth financing. However, SCI’s debt metrics remain manageable, with a net debt/adjusted EBITDA ratio of 3.8x and a weighted average debt maturity of 5.1 years.
Outlook and Recommendation: Sembcorp Industries is well-positioned for medium-term growth, supported by robust cash flows and strategic investments. UOB Kay Hian maintained a “BUY” rating, raising the target price to S$8.02 (previously S$7.47), driven by earnings upgrades from Senoko Energy’s contribution, the SembEnviro sale, and improved margins in the IUS segment.
Key Catalysts:
- Execution of renewable energy targets through organic and inorganic growth.
- On-time and within-budget delivery of a 600MW hydrogen-ready co-generation plant in Singapore.
- Capital recycling in its energy portfolio.
SCI’s strategic transformation and leadership changes reinforce its growth trajectory, making it a key player in Singapore’s industrial conglomerate space.
Thank you
