Sembcorp Industries’ 22% rout in its share price – Is this overdone? (19 Aug 25) – Ernest 15
Sembcorp Industries’ 22% rout in its share price – Is this overdone? (19 Aug 25)
In six trading days, Sembcorp Industries (SCI) has fallen 23% from $7.80 on 7 Aug 2025 to close $6.01 on 18 Aug 2025. After taking into account of $0.09 dividends which was ex on 15 Aug, this decline still amounts to an approximate hefty 22% drop, shaving off S$3.0b of its market capitalisation.
1HFY25 core profit was S$491m, vs S$489m in 1HFY24. Granted that it has missed consensus estimates, has this selling been overly excessive?
Brief points on SCI
a Analysts remain largely positive
Based on Figure 1 below, average analyst target price is $7.43, representing a 24% potential capital upside. Consensus estimates a FY25F dividend yield of around 4.2% with total potential return of around 28%. It is also noteworthy that the lowest and highest target prices for SCI are $6.40 and 8.02 respectively. [In my attempt to present the most accurate data, I have manually taken into account only 11 analyst target prices (instead of 13) post SCI results. I didn’t take into account of another two analysts with their target prices before the results as it will not be accurate.]
Fig 1: Average analyst target price $7.43; total potential upside of around 28%
b Chart looks prime for a bounce
Based on Chart 1 below, since SCI’s advance from 7 Apr 2025, it has retraced more than 78.6% of its rally.
SCI’s 14D RSI closed at 21.9 on 18 Aug, lowest since Mar 2020. At this level, SCI is very oversold given current market conditions.
Near term supports: $5.96 – 5.98 / 5.89 – 5.91
Near term resistances: $6.20 – 6.26 / 6.38 – 6.42
Chart 1: Oversold pressures build as RSI approaches 21.9
c Dividends have been rising steadily over the past 5 financial years
Based on Figure 2, SCI has been raising its absolute dividend per share (DPS) from $0.05 in FY21 to $0.23 in FY24. Based on Bloomberg, consensus estimates that SCI’s FY25 DPS may reach $0.25, up from $0.23 in FY24. 1HFY25 DPS has increased by 50% from $0.06 in 1HFY24 to $0.09 in 1HFY25. My personal view is this DPS of $0.25 / share is likely to be achievable barring unforeseen circumstances. This is because SCI is likely to maintain at least $0.23 DPS in FY25 with (some citing) an additional $0.02 special DPS from its divestment of Sembcorp Environment in Mar 2025. Phillip Securities, in their 11 Aug 2025 report, estimates that SCI can give a DPS of $0.35 and $0.45 for FY25F and FY26F respectively. If this materialises, SCI is trading at 7.5% FY26F dividend yield!
Fig 2: Dividends have been rising steadily over the past 5 financial years
Source: Shareinvestor 15 Aug 2025
d Inexpensive valuations, post 22% decline in share price
Based on Bloomberg, SCI trades at 10.3x FY25F PE and 9.5x FY26F PE. In a UOB Kayhian report dated 11 Aug 2025 when SCI was trading at $6.72 then, UOB Kayhian wrote that SCI trades at 46% discount on EV/EBITDA against its peers. This was notwithstanding that SCI has an expected ROE of 19.2% which is more than 69% higher vis-a-vis its peers. By these metrics, valuations do not seem demanding.
e Potential catalysts (accretive M&As; capital recycling)
Some potential catalysts cited by analysts include
- SCI is scouting for M&A opportunities in both brownfield and Greenfield projects across the Middle East, with potential deals expected to contribute at least ~S$100m in earnings accretion.
- Management is considering capital recycling of mature renewable energy assets in India. As at 1H25, India operations had 3.3GW installed capacity and another 3.3GW under construction.
- CGSI estimates monetisation/recycling could materialise by 2H25–1H26.
Potential risks / challenges
Below are examples of some risks only. To better appreciate the potential risks in SCI, you can refer to the analyst reports HERE.
a Chart reading is subjective
For pts b to e, they are self-explanatory. For pt a, I just want to emphasise that chart reading is an art and is very subjective. Secondly, there is no rule that RSI cannot go much lower.
The Edge has a technical post on 15 Aug HERE, citing that SCI may reach $6.00 and a key support is at $5.64-5.70. They believe that SCI’s retreat may be arrested this coming week due to oversold pressures, but any price rebound may be weak at this stage.
b Demand-supply imbalances in renewable markets in China and India.
c Potential adverse policy changes impacting renewables valuation.
d Softer wholesale energy prices in Singapore.
e Additional risks include centralised natural gas procurement in Singapore, and rising capex requirements for transmission and storage infrastructure.
Conclusion
Amid a 22% decline in SCI’s share price which wiped out S$3.0b of its market capitalisation, this decline may be excessive as oversold pressures build. Over the medium term, most analysts continue to favour SCI with consensus’ analyst target price and FY25F dividend at $7.43 and 4.2% respectively.
Nevertheless, there are certainly risks to take note in SCI. Demand-supply dynamics in renewable markets; potential policy changes in the markets which SCI operates are some of the key risks. Furthermore, chart reading is subjective and it is by no means certain that a price bound is imminent even as oversold pressures build.
📩Want to receive such write-ups earlier?
To open an account or explore your options, feel free to email me at ernestlim15@gmail.com.
✨Extra Value for Clients:
My clients regularly receive:
- Market observations and potential trading ideas with the usual caveats.
- Exclusive notes and insights after my 1-on-1 meetings with C-suite leaders – deeper than what I share on LinkedIn.
Importantly, every investor is different. Always assess your own financial situation and risk appetite before making investment decisions. Readers should do their own due diligence as everybody is different with different individual circumstances.
Lastly, feel free to add me on LinkedIn for market updates and company insights.
P.S: I have informed my clients to take a look at SCI over the past three days. I am vested.
Disclaimer
Please refer to the disclaimer HERE.
