Sembcorp announced a proposed acquisition of Alinta Energy, one of Australia’s leading integrated energy companies, for an enterprise value of AUD6.5b.
Diversifying Down Under
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The debt-funded deal will be high single-digit earnings-accretive. Debt metrics will worsen but stay within management's comfort range, and transition targets will be pushed back.
Acquiring Alinta Energy
Alinta is a vertically integrated gas and electricity provider in Australia. It has an established coast-to-coast presence with 3.4GW of installed and contracted generation assets across coal (1.14GW), gas (1.47GW), and renewables (0.8GW). It has 1.1m customers in the electricity & gas retail markets.
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Strategic and financial merits of the deal
The deal offers a scalable platform with high-quality assets. It will diversify Sembcorp's footprint in an AAA-rated geography with regulatory certainty. The pipeline of renewable and firming assets will help Sembcorp in driving its energy transition. The deal will be ~9% EPS accretive on a pro-forma basis for FY2024. While gearing will increase (net debt to adj. EBITDA rising from 3.6x to 4.6x), the metrics are still within management’s comfort level.
Management indicated there will be no need to raise equity to fund the transaction and committed to maintaining 23 cents in dividends. Sembcorp expects its emissions to increase in the near term before declining.
Maintain HOLD
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Above is an excerpt from a report by Maybank Research. Clients of Maybank Securities may be the first to access the full PDF report @ https://www.maybanktrade.com.sg/.
