Stock Analysis 3: Sembcorp Industries 2014Q4

Market Price (2015-1-26) = $4.25

Earnings
Approx. EPS: $0.3076 (9M14) + $0.123 (4Q13) = $0.431 (TTM)
Approx. DPS: $0.17

Order Book: $12.6B

Ratios

P/E: 9.86 (5 year historical average 10.3)
Yield: 4%

Profitability

ROE: 16.13% [Avg for SG blue chips is 11.8%]
Asset Turnover: 0.748 [Avg for SG blue chips is ~0.5]
Net Income Margin: 7 [Comparable]

Balance Sheet

Current Ratio: 1.16
Debt To Equity: 0.65 [Warren Buffet's advocate <0.5. More than 2 is bad.]
NAV: $3.02

Additional Info

Biannual distributions in Apr/Aug. Profit contribution roughly 50% utilities, 50% marine.

Personal Opinion:

- Pressure in Utilities sector locally in Singapore.
- Pressure in Marine sector, for who knows how long.
- Experiencing declining profit margin, ROE and asset turnover for 4 years, although they are still impressive.

+ Undemanding P/E of <10 for solid blue chip.
+ Government Backed. Temasek Holdings own ~50% of the company.
+ Company has been buying back aggressively since Oct, from S4.9x to S4.2x.
+ Defensive utilities industry, with strong catalyst for growth overseas (e.g. India Power Plant).

Company spending a lot on capital expenditures, which can be a pro or con depending on if you're investing for the long term. While it still has good resources, its balance sheet has weakened considerably.

Really good stock... hoping to allocate more if it hit lower 4s.