Sembcorp Industries (SGX: U96) shares are up 6% today. U96 shares seem to have risen on the back of the company’s announcement that they’re going to go green. Or more green perhaps. This can be looked at in a couple of different ways. One is simply that if a company ticks the ESG boxes then ESG funds will invest more in it - that could be good for the share price over time. The other is that, well, maybe renewables can actually be profitable? Given price changes that is actually possible.
From the company itself: “As we strive towards a greener portfolio and a more sustainable future, it is important to integrate sustainability across all business functions, including finance. We utilise sustainable financing as a funding instrument to deploy capital towards our transformation and growth of our renewables and integrated urban solutions businesses.” That could well be a part of it. There’s a lot of ESG money out there in funds looking to invest. So, go sustainable and more of those funds will buy the corporate equity.
There’s also this: “Singapore’s Sembcorp Industries Ltd (SGX:U96) strengthened its green energy ambitions, setting a target of 25 GW of gross installed renewables capacity by 2028 as it announced its 2023-2028 strategic plan on Monday.” Solar is definitely getting cheaper by the day so maybe that will be profitable unsubsidised? That is a possibility after all.
We’ve talked before of Sembcorp: “But there’s an entirely another problem here. The Sembcrop Marine Yard is not part of Sembcorp any more. It’s now over in Seatrium: “Seatrium (SGX: S51) is the former Sembcorp Marine. No, the name change was not all about that Brazilian corruption inquiry - that's all dealt with anyway. Rather, there was a merger of interests and a name change seemed like a sensible thing to do at the time. “ Singapore, 3 April 2023 – Sembcorp Marine Ltd (the “Company” or “Sembcorp Marine” and, together with its subsidiaries, the “Group”), is proposing to change its name from “Sembcorp Marine Ltd” to “Seatrium Limited” following completion of the combination of the businesses of the Company and Keppel Offshore & Marine Ltd on 28 February 2023,” That difficult marine business is now in Seatrium.
Also about U96 shares: “Sembcorp (SGX: U96) (OTCPK: SCRPF) shares are up 8.75% today. The U96 share price rise seems to be a delayed reaction to Friday’s announcement of the results. Which showed a decent increase in profits. So, logically, we should see that rise today. But it’s worth noting that share price rises don’t necessarily all come in one fell swoop. Revaluations - especially if they’re about the general prospects for the future of the company - can take their time to happen.”
We do think this current price rise is based upon that announcement of a considerable move further into renewables. What we’re not wholly sure about is whether it’s prospects for the operating business or the effects of ESG on the capital structure.