Sembcorp investor sentiment hit by investment losses

Much of the group’s impairments came from the recently-acquired UKPR assets.

Sembcorp Industries’ impairments in Q4 may likely cause greater impact on investor sentiment towards the group’s decision-making process related to its acquisitions, according to a report by OCBC Investment Research.

The company announced in a profit guidance that it will record material impairments of $245m in its Q4 2019 financial statements. The bulk of it comes from a $158m impairment of its UK Power Reserve (UKPR) assets, with the rest coming from the divestment of its water business in Chile and impairment in China for wastewater treatment assets.

“Focus will likely be on UKPR, which was just acquired by SCI for about S$385m in 2018,” the report stated. The impairment of these assets were attributed to a higher energy capacity and lower underlying demand due to energy efficiency and reduced industrial production.

Further, the $245m impairment is about 4% of the group’s net asset value as of Q3 2019, the report noted.