This is my 1st attendance for the Sembcorp Ind AGM which was held at the 30 Hill Street. As part of my experience, I will try to summarize and recap what has been discussed during the questions and answers section so that fellow investors who missed the AGM can keep up with the update.
I arrived at the place quite early around 30 minutes ahead of the scheduled time. As expected, there were not many people yet in the room so I went to register, grab my annual report and the voting call and picked a good spot to sit down. Not long after, there is an uncle who came and sat in front of me and so we began exchanging talks about the company, even to the extent of comparing Keppel with Sembcorp.
At 11am sharp, Mr. Tang Kin Fei (Group CEO) commenced the AGM by summarising the results for the year 2012. As we began the first resolution, there were many questions raised from the shareholders to the Chairman, CEO and the Board of Directors.
The first question asked was from an ahpek shareholder. He grinned about why the screen was placed at the side and not at the center and that he could not see properly after being directed to sit in the middle. He also gave feedback about how Capitalmallasia (CMA) gave a better handout than Sembcorp. Finally, he asked why price for Sembcorp has been trading sideways in recent months and whether it is due to the miserable dividends they gave out (i.e 15 cents/share). All the Chairman and CEO did was to nod their head in agreement. A very light start as usual!!!
Then some serious questions began when the uncle beside me started asking regarding the competitiveness of the energy market and how it will dampen the profits margin for Sembcorp in the future. The Chairman responded by saying that they have been in the business for many years. Any energy prices that are set are not in relation to what the other competitors are setting. The supply and demand are what that determines the price but nevertheless they are confident that the energy market will stay strong in the next couple of years.
The next question was from another shareholder who asked regarding the intangible asset which has either been depreciated or amortised. The question was not exactly very clear to the Chairman but all he responded was that they are in accordance to amortising it in respect with the FRS guidelines.
Next it was my turn to ask. My first question was pertaining to the increase in the impairment losses for trade receivables on Notes 9 of the Financial Statement. The group CFO took over to respond to this by saying that the increase was marginal given the corresponding increase to its revenue so nothing much to worry about. He gave the assurance to the shareholder that risk management is taken care of. I wasn’t too impressed with the answer given as it increases quite a bit in my opinion from S$19m in 2011 to S$26m in 2012. Nevertheless, I didn’t pursue it any further.
My second question was relating to the dividend payout policy (~35%) which if compared to fellow conglomerates like Keppel (~40% payout) or ST Eng (~90% payout), is a little on the low side. I asked the Chairman if they would consider increasing the payout ratio at some time in the future when its utilities business hit a maturity stage eventually. The Chairman responded by saying that such comparison should not be made, even with the likes of Keppel as Sembcorp is operating at a much different business nature than the others. For now, what Sembcorp will do with the earnings is to use them to grow their utilities business aggresively, like the utilities in Oman and a few other projects scheduled for completions at the end of 2013. This is done to ensure that the utilities business will earn higher recurring income which will then provide greater shareholders’ return.
My final question was pertaining to the overall business directions for Sembcorp in the future. I asked that since its utilities business has now grown to a stage where it is able to generate sufficient and sustainable cashflow on its own to pay dividends to its shareholders, would they consider either reducing their stake in the marine business (like what Keppel Corp did with its K-Reits through dividend-in-specie) or would they consider spinning off its utilities business as a trust separately in the future. The Chairman responded by saying that the company will spin off its utilities business as a trust eventually but not sure when. It could be in a matter of 5 to 7 years or longer. As for reducing its stake in the marine business, it has no plans currently at the moment.
A few other questions were raised by other shareholders before we proceed with the rest of the resolutions. After we finish, we proceed out to grab our lunch box :). It was around 12.45 by then and everyone were feeling hungry. I took the lunch box and went sweet home after that.
I own 2 lots of Sembcorp as of this writing.
P.s: I can’t help but think that Uncle CW is there too. Uncle CW, were you there?