Sembcorp Industries to issue green bonds and financial instruments

Sembcorp’s energy unit saw shares jump over 2% following the launch of a new renewable energy investment scheme.

  • Sembcorp Industries Ltd (SGX: U96) share price hits S$2.02 a share on Wednesday (12 May 2021)
  • The energy group announced the launch of the Sembcorp Green Financing Framework a day earlier
  • Sembcorp may now issue green bonds and other green financial instruments to support the financing and refinancing of green projects
  • Analysts envision a 10% upside on the stock in the next 12 months
  • Buy and sell Sembcorp Industries stocks with an IG account

Sembcorp Industries share price: What’s the update?

Sembcorp Industries shares were up over 2%, after it announced the launch of the Sembcorp Green Financing Framework.

The blue-chip counter is up nearly 17% so far this year. Analyst sentiments published by SGX StockFacts show a consensus rating of ‘outperform’ alongside a 12-month target price of S$2.21 on the stock.

The target price represents a 10% upside from the stock’s last traded price of S$2.01 at 16:05 SGT on Wednesday.

Three weeks ago, Sembcorp Industries shares hit a 15-month peak of S$2.21, following ratings and price target upgrades from HSBC and Credit Suisse analysts.

HSBC had upgraded its call on the stock to ‘buy’ alongside a higher target price of S$2.61 from S$1.68. HSBC said its valuation of Sembcorp’s energy division is now at an estimated enterprise value eight times that of the group’s earnings before interest, taxes, depreciation and amortisation.

Credit Suisse had initiated coverage on the stock with an ‘outperform’ rating and a target price of S$2.40, citing an expectation for the group’s return on equity to return to 10% in 2021 and 2022, from 3% in fiscal 2020.

Read more: Top 5 Singapore stocks to watch in May 2021

How will the new financing framework impact investors?

The framework is aligned with The Climate Bonds Initiative (CBI) Climate Bonds Standard v3.0, containing rigorous scientific criteria which are consistent with the 2 degrees Celsius warming limit declared in the 2015 Paris Agreement.

The framework, which has been reviewed by EY - a CBI-approved verifier, is also aligned with Green Bond Principles by the International Capital Market Association as well as other international market standards and guidelines including Green Loan Principles and ASEAN Green Bond Standards.

Sembcorp may now issue CBI-certified green bonds and other green financial instruments to support the financing and refinancing of eligible green projects.

As outlined in the framework, this includes generation and supply chain facilities, transmission and supporting infrastructure of renewable energy assets as well as energy storage assets and facilities.

With the framework, Sembcorp will now be able to provide greater transparency and assurance for investors and lenders who are seeking investments and projects aligned with their specific sustainable investment strategies in support of a low-carbon economy.

Eugene Cheng, Group Chief Financial Officer of Sembcorp, said that the Green Financing Framework ‘forms the backbone’ of the company’s commitment to growing its renewables portfolio, as well as its part in supporting the global energy transition and creating a more sustainable future.

‘With the integration of this ambition into our financing strategy, we look forward to being a robust player in the green finance ecosystem,’ Cheng said.

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