Sembcorp’s full-year profit to balloon to over $1b on back of hefty divestment gains

Should shareholders expect a special dividend?

Despite the weak offshore market, Sembcorp will still book record profits this year thanks to its timely decision to sell its 40% stake in its Australian waste management business.

According to RHB Research, the sale of its stake in SembSita Pacific will cause the group’s profit to exceed $1b this year. Sembcorp will reap a hefty $350m gain from the deal, which is expected to be completed in the fourth quarter.
Record profits, however, will not necessarily translate to special dividends for investors.

“Though Sembcorp has in the past distributed special dividends of up to 2 cents/share, we prefer to err on the side of caution and merely expect a stable dividend YoY. This is on the high capex and working capital requirements of Sembcorp Marine this year. Any special dividend would be a bonus,” RHB Research said.

“This sale does lend greater confidence in the sustainability of Sembcorp’s dividend. We also understand that it was approached by the buyer for this asset and similarly for the previous Bournemouth sale, would divest assets only at what it deems are good prices,” the report added.