Sembcorp Industries Stock Returns to MSCI Singapore Index: 4 Things Investors Need to Know

August 15, 2023

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Sembcorp Industries Ltd (SGX: U96) will make its triumphant return to the MSCI Singapore Index (“SIMSCI”) on 31 August 2023, after a notable hiatus since May 2020.

In the process, it will oust Venture Corporation Limited (SGX: V03) due to its outstanding performance throughout the year.

The SIMSCI is a benchmark index representing the performance of large and mid-cap segments of the Singapore stock market based on market capitalisation.

It comprises 22 stocks, which includes 20 stocks that are also part of the Straits Times Index (STI) in addition to the NYSE-listed Sea Limited (NYSE: SE) and NASDAQ-listed Grab Holdings Limited (NASDAQ: GRAB).

Here are some of the key highlights that led to the return of Sembcorp Industries into the SIMSCI.

1. Remarkable growth in share price

Sembcorp Industries achieved an impressive 77% year-to-date total return as of 11 August 2023, surpassing all 22 SIMSCI constituents.

This shows a significant leap in daily trading turnover, averaging S$23 million in 2023 compared to S$14 million the previous year.

Additionally, the company recorded the highest net institutional inflow in the local market, with a net inflow of S$162 million as of the same date.

2. Market capitalisation surge

Since its removal from the index in 2020, Sembcorp Industries’ market capitalisation skyrocketed from S$2.4 billion to a whopping S$10.6 billion by 11 August 2023.

This was in line with the rising interest among institutional investors, as seen by the high net institutional inflow.

3. Strategic moves post-demerger

Post its landmark demerger with Sembcorp Marine in 2020, Sembcorp Industries set ambitious targets for 2025.

It aims for 70% of its net profit to be sourced from sustainable solutions.

This strategy seems to be paying off, as indicated by Sembcorp Industries H1 2023 performance report on 4 August 2023.

In its latest earnings results for H1 2023, Sembcorp Industries’ net profit increased by 56% year-on-year (yoy) to S$608 million.

The results easily surpassed expectations.

A significant portion of the company’s success in the H1 2023 was attributed to the conventional energy segment, with rising power prices in the Singapore electricity market, and an increased operational capacity in the renewables segment.

4. Renewable energy push

By June 2023, the company’s gross renewable capacity (including both installed and under development) reached 11.9 GW.

This was also reflected in its financial performance as the fast-growing renewable energy segment’s net profit posted an increase of 54% yoy to S$117 million in H1 2023.

This was supported by a flurry of clean energy acquisitions in India and China.

Return to SIMSCI could point towards further upside

Inclusion in the SIMSCI is not just an acknowledgement of Sembcorp’s growth but also an indication of its potential.

As the company becomes more visible to institutional investors and general stakeholders, its commitment to renewable energy and consistent financial performance can attract more investments.

This can further drive its ambitious goals in the renewable energy sector and position it as a growth leader on the SGX.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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