Published April 21, 2009

AGM WATCH

Sembcorp's prudence wins over shareholders

By VINCENT WEE

	Email this article
	Print article
	Feedback

CASH and what it is being spent on was at the heart of many shareholders' concerns at Sembcorp Industries' annual general meeting yesterday.

While Sembcorp's prudence in conserving cash was applauded, some of the more senior shareholders seemed to have difficulty grasping modern concepts such as the use of project-specific financing to limit risks to the company, as well the use of various loan instruments to limit forex risk. It took some protracted explanation to convince one particular shareholder why the company should borrow money when it has more than US$2 billion in cash.

Sembcorp's foray into the utilities business also posed some complications for shareholders familiar with only brick and mortar concepts. For example, there were several questions on how Sembcorp's UK utilities operations will benefit from the generation and sale of carbon credits. The questioners, however, seemed placated when chief financial officer Lim Joke Mui told them that Sembcorp gained &pound16 million (S$35.6 million) in pre-tax profit from the credits last year, which was double what it had made the previous year.

The perennial question of the Gallant Ventures stake was also brought up, and once again the explanation was made that divesting Gallant at current prices will not add to shareholder value. Sembcorp chairman Peter Seah also reiterated that Sembcorp incurs little holding cost in keeping the shares until the market offers better value.

Continuing a theme of wariness over current economic conditions and the credit crunch, many questions focused on whether the marine sector, in which Sembcorp has a large stake through its share in Sembcorp Marine - is contracting and by how much.

Directors declined to give details, citing the need to preserve market intelligence. But they assured shareholders that while negotiations with clients are always ongoing, projects are maintained on a cashflow-positive basis and cancellations or order reschedulings have no impact on the company.

Concern was also expressed about potential mergers and acquisitions. One shareholder claimed that some Temasek-linked companies have destroyed shareholder value through deals. Independent directors were urged to examine deals carefully and to block them if they are seen to be non-beneficial to shareholder value.