Sembcorp Industries - Maybank Research 2024-11-12: Accretive Divestment Of Non-core Business, BUY

• On 8 Nov, Sembcorp announced sale of SembEnviro, a waste management services provider, for S$405m, at a 43% premium over book value. Sembcorp will use the sales proceeds to invest further in the energy business to achieve the 2028 strategic roadmap.
• - Read this at SGinvestors.io -

Waste to energy

• A wholly owned subsidiary of PT TBS Energi Utama (TOBA IJ) will acquire 100% of the business from Sembcorp. The sale price has been arrived at on a ”willing buyer, willing seller” basis and will expand the buyer’s regional waste management platform in Indonesia and Singapore as it undergoes the green business journey for its diverse business portfolio.
• - Read this at SGinvestors.io -

Aligning with strategic targets

• Earlier, Sembcorp announced the proposed purchase of 30% stake in local power producer, Senoko Energy (see report: Sembcorp Industries - Accretive 30% Stake In Senoko Energy; Deepening Footprint).
• We believe part of the proceeds may be used to finance the purchase. Based on pro-forma disclosures, the transaction will be 3.4% accretive to NTA and 13.4% to EPS. This includes divestment gain of S$114m. Excluding the gains and factoring in financing savings, we estimate ~4-5% earnings accretion.
• Further, Sembcorp had announced in the 1H results the cessation of the public cleaning contract for the Central-North region from end-Sep 2024. As such, the proposed sale should mitigate any adverse business impact from the non-renewal of the contract.

Maintain BUY

• Read more at SGinvestors.io.

Krishna Guha Maybank Research | https://www.maybank.com/ 2024-11-12 SGinvestors.io

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