Sembcorp Industries share price in cheeky run

Since last coverage on Sembcorp Industries share price in June 2021, there was much volatility for this counter. The pandemic disaster in India had caused much uncertainties for Sembcorp Industries’ India thermal projects, causing Sembcorp Industries to be bearish from June to October 2021. The litmus test arrived when the Group announced on 2 August 2021 the impairment of $212 million for its 49%- owned joint venture Chongqing Songzao Sembcorp Electric Power Co. $SEMBCORP MARINE LTD(S51.SI)$

That fateful announcement on 2 August 2021 caused Sembcorp Industries share price to tumble to a low of $1.80 in October 2021. Consequently, the management went on a rescue mission for Sembcorp Industries share price by embarking on a series of shares buybacks. As at 13 December 2021, the management repurchased 6,780,700 shares from the market. Based on the recent bullish run of Sembcorp Industries share price, it seems that the shares buybacks helped to revive the stock.

Since the fateful demerger of Sembcorp Industries with Sembcorp Marine, Sembcorp Industries share price had gone from strength to strength, surging from $1.18 in September 2020 to the recent $2.65. Within the span of just 1.5 year, Sembcorp Industries share price rocketed more than 100%. Given the robust Sembcorp Industries share price, credit should be given to the Group CEO, Wong Kim Yin, who joined the Group only in July 2020.

Although CEO Wong Kim Yin joined the Sembcorp Industries only in 2020, he had steered the Group through a challenging and tumultuous period brought forth by the pandemic crisis. This is no mean feat. Many critics would argue that Sembcorp Industries is backed by Temasek Holdings, so a corporate turnaround is a given. To this end, I would disagree. I have seen cases of listed entities backed by Temasek Holdings but failed to achieve turnarounds. Examples included NOL, SPH and SingPost.

During his short tenure, CEO Wong has been instrumental in transforming Sembcorp Industries’ portfolio from brown to green. For the past two years, the Group secured a slew of green energy contracts. These contract wins nursed Sembcorp Industries share price back to pre-pandemic levels. While Sembcorp Industries share price had not restored to the high of $5 levels last seen in 2014, the Group is on track in executing its growth strategy.

Sembcorp Industries share price has become increasingly volatile, with 5-year Beta hitting 1.05. The volatility of Sembcorp Industries share price should be attributed to the soaring commodity prices and rising interest rates. The Group is still relying heavily on Convention Energy assets, such as thermal plants, for its earnings. So the increase in raw material prices (e.g. coal) will hurt earning margins. Against the backdrop of global economic recovery and the ongoing Russian’s military operation in Ukraine, what is the outlook for Sembcorp Industries in 2022?

Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested in Sembcorp Industries share currently. Whether Sembcorp Industries share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

Sembcorp Industries share price to sink or swim in 2022?

Admittedly, I am a big fan of Sembcorp Industries as it was my best investment. I had clocked in a profit of $17,500 after cashing out in December 2020. Back then, I had predicted that Sembcorp Industries share price would continue to perform well in 2021, which it did. And year-to-date, Sembcorp Industries share price had climbed 33%.Whether Sembcorp Industries share price will sustain its bull run is subjected to debate.

source: sg wealth builder