SembCorp Industries

[Ben]

Have investors overreacted on the Sembcorp Industries' stake in Sembcorp Marine to warrant a selldown all the way to $4.19? Currently trading at historical PE of 9.2 and yield of 5.3%.

Their utilities business actually accounts for 53% of net profit while marine accounts for 42% but it appears from the price fall as though marine accounts for 100% (in my opinion).

No doubt historical ratios are not good indicators of how cheap/expensive a stock is but I think Mr. Market is not giving SCI's utilities business the valuation it deserves.

I read somewhere that there is an over supply of electricity in Singapore which will affect its financial performance. Nevertheless, if one has a long term view, this company is worth holding, IMO. The India power plant is expected to commence commercial operation by end of this year and they have already secured a 25 years power purchase agreement for 40% of its capacity. Also, its third engine of growth, ie, industrial parks/township development is showing promising growth prospect. The biz there are in requires high technical expertise, which means high barrier of entry.

I am slowly averaging down my purchase price, it not very often that you can get a sales price from this counter.