What will Sembcorp do with its $350m SembSita cash hoard?

It could pay out special dividends or make more acquisitions.

Sembcorp will become $350m wealthier after completing the divestment of its stake in its Australian waste management business SembSita. Analysts expect that Sembcorp will use its fatter war chest either to pay out special dividends or make more accretive acquisitions.

Maybank Kim Eng analysts said that the deal translates to roughly 27 S cents per share, which will allow the group to snap up other high-growth energy or water businesses.

Although the group could choose to pay out dividends, Maybank Kim Eng cautioned that Sembcorp is likely to keep a tight grip on its cash on back of the dim marine landscape and uninspiring utilities outlook.

Meanwhile, DBS said that the deal provides a potential DPS upside of 6-7 cents per share, which will lift dividend yield from 4% to 6%.

“If completed by end of 2015, the expected net gain of S$350m will lift SCI’s current forecasted PATMI from S$738m to S$1,088m. However, recurring income could be lowered by approx. S$30m pa thereafter, in the absence of contribution from SembSita,” said DBS.

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