Sembcorp to lead the charge from Singapore

Government-owned Sembcorp Industries is set to become the Island State''s first international equity issuer of 2001.
The diversified group is planning to raise S$318 million ($182 million) at the end of this month from a 185 million new share offering, with JP Morgan as bookrunner and Nomura as co-lead. Winning the follow-on offering marks a major breakthrough for JP Morgan and represents the first deal the bank is likely to complete in Asia under the combined aegis of Jardine Fleming, Chase and JP Morgan.

The US investment bank was a natural choice to lead the deal having recently raised S$203 million for sister company Sembcorp Logistics back in December. Jardine Fleming managed the 24.3 million new share sale, proceeds from which were used to fund the purchase of a stake in Europe's largest sea freight operator, Kuehne & Nagel.

JP Morgan also has strong links with Sembcorp Industries, having advised on Temasek's sale of Semac, Singapore's largest waste management company, which the company purchased last autumn for S$120 million. The bank is also close to Singapore Power, whose former treasury executive Low Sin Leng is now Sembcorp's COO.

Indeed, Low was hired in anticipation of a greater push into the power industry, one of Sembcorp's four key areas of operation alongside construction, marine engineering and integrated logistics. Proceeds from its forthcoming new share issue will be used to fund a bid for one of the three power plants being put up for auction by Temasek over the next two to three months. Two of the three - Power Senoko and PowerSeraya - were owned by Singapore Power, while the third, Tuas Power, is owned by Temasek itself.

Market observers comment that Sembcorp is likely to embark on global roadshows within the next two to three weeks. Provisionally scheduled to be completed end March/beginning April, the deal will represent 11.5% of the company's enlarged share capital.

Analysts say that with its diversified asset base, Sembcorp represents a good proxy for the Singapore economy. "Global equity markets are not that steady, but in Asia, Singapore and Hong Kong are still well bid," says one local observer. "Sembcorp is an MSCI index constituent stock and one of Singapore's largest companies, with a market capitalization of S$3 billion. It's a solid, blue chip, old economy stock which should play well in the current market environment."

With a current share price of S$1.72, the company is said to be trading on a price/earnings ratio of roughly 15 times 2001 earnings and is currently up 1.18% on the year. Yesterday (Thursday), the company reported year-end results almost flat to 1999.

Profit rose from S$128.2 million to S$131 million, with sales up 21% to S$2.9 billion. The company, which is 59% owned by Temasek, said that it envisages a capital expenditure plan of about S$800 million this year, of which $300 million will be generated by the share sale and the remainder from other sources, including a probable first domestic bond offering.

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