Friday, October 30, 2015

Random thoughts: Q3 sembcorp industries

Q3 results is bad, but it was expected.

I expected it to get worse going forward. 

Sembmarine will be the biggest drag, the delays just started. Utility biggest drag comes from Singapore and was NOT offset by overseas operations YET. India, ASEAN and Australia market bottom line is improving QoQ but nowhere contributing at level where I expects. I send an enquiry to IR asking about the gestation period of India operations before it contribute to bottom line. There is no reply yet, if they do reply, I will update this post. 









As a random thought series, I am not going into the nitty gritty of the numbers or projects. 

It's my reflections. Some of it based on hindsights.

1) I expect weak numbers from
Marine and Singapore Utility market but expect overseas market to offset some of it. Because I believed Mr market might have been over pessimistic, I bought into it, thinking I got it at a low. 

2) I saw the ability to clinch contracts from Municipal governments as a plus point. 

3) I believed that are catalysts such as injection into reit or selling of mature asset

Am I totally off the mark in my assessments? Not actually, 2015 will be ok given its earlier wise allocation of capital.

Will marine winter lasts longer than 2016? I have no idea. Sembcorp will be in trouble if the marine problems drag beyond 2016. 

4) Vietnam land sales is slower than I expected given how "hot" the media is blowing in its direction.

I am not adding. Am I selling? Most probably also not. I remembered Sembcorp was trading at $3 during its recent low, and I slept well, not thinking of adding or offloading.

My strategy was to collect during down cycle and enjoy the upcycle. But if the down cycle is super far from what I believed it was, think this strategy will fall apart. But it do not think it is going the way of dodo and neither do I think they are suspending dividends ... So I will need to endure in the meantime.

How about people who have not got in?
Well, well... I have no idea myself LOL

4 comments:

  1. From their analyst call, India operations expected to break even by end of 2015. In fact India operation losses already u-turned from Q2 to Q3

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    Replies
    1. HI LGRT,

      Thanks for the info! That's good. Hoping for a meaningful offsetting of markets.

      Marine will be a pain the ass. Brazil will have problem since its political too

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  2. Hi SI,

    Short term Marine business even with orders, will be marginal profits with lousy payment terms. So the drag is not only top and bottom line but cash flow.

    Long term, hopefully oil price move up to $70, in 2017.

    In oil and gas, many are expecting the worst is yet to come when order books dry up in 2016!

    Let's hope it's not the case. But a company like SCI, I m confident they will get over the headwinds over long term of 5-10yrs! LNG should come into play to give marine some balance!

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    Replies
    1. Hi Rolf,

      Ya.. I believed winter is long, but winter provide the opportunity to buy cheap.

      LNG carrier can be built by many yards, it will be a tough market too. I know YZJ talking about building one for years Liao.

      I am not sure if yards build LNG terminal thou ....

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