SembCorp Announced Profit Surge of 56% for First-Half 2023

 4 August 2023

SembCorp announced a profit surge of 56.3% for its first-half 2023 report.  However,  the market was not excited by this good profit news.  It opened today at a price of S$5.60 and went up as high as S$5.62, which is only 2 Singapore cents up from yesterday’s closing price.  What went wrong?

Possible reasons

1. The biggest profit contributor to the surge is the conventional energy business;
2. The proposed interim dividend is only 5 Singapore cents per share;
3. Technical reasons. 

Profit Contributors

As reported by the StraitsTimes,  the biggest profit contributor is the conventional energy business, These are profits from its conventional power generation.   

As this profit is a recurring profit generated by higher electricity tariffs which may include some profits from fuel hedging,  the traders might have already priced in the earlier pricing.    

As Energy prices have been falling since they reached their peak last May, traders could have expected these earnings from conventional energy businesses will drop in the future.

For information,  JP Morgan suggested SembCorp's price would drop down to S$4.50 when they speculated the electricity tariff would drop in the near future.

Interim Dividends

Many traders were of the view that the interim dividend of 5 Singapore cents was a disappointment.   At a price of S$5.60 today,  it is only about 0.8%.  It is a far cry compared to the 56% profit surge that SembCorp was making in the first half of 2023. 

 

Technical Reasons

Technically,   we see SembCorp’s price having difficulties getting above the trendline T1 in the past few trading days.  It climbed as high as S$5.80 during the day just to find the price dropped below S$ 6.20 by the closing time.  

The price is presently trapped in the horizontal symmetrical triangle waiting for the trendlines to be broken.  It has 2 immediate support,  S1 and S2 as can be seen from the following chart.  Unless there is better news coming out for SembCorp,  it is unlikely that SembCorp’s price will break T1.

 

 

Disclaimer:  This article is for information and educational purposes.   Readers are advised to conduct their own research and study to make their own investment decisions.

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