SEMBCORP INDUSTRIES LTD
U96.SI
Pay Day from Associate
- SCI is divesting 40% associate, SembSita, for a net SGD350m gain. We adjust FY15E/16E net profit by +46%/-4%.
- Sold at an implied 14.4x FY14 P/E, the high end of industry P/Es, we see this as a decent deal. Proceeds could be reinvested in new businesses or special dividends.
- We raise our SOTP TP from SGD3.60 to SGD3.67 for the gain.
- Still, maintain HOLD on Marine concerns and a lack of near term catalysts for Utilities.
What’s New
- SCI intends to divest its 40% stake in SembSita to Suez Environment Asia Ltd. SembSita is an Australia-based integrated wastemanagement company. Suez holds the other 60% stake and has approached SCI for the sale. The cash consideration of AUD485m (SGD482m) would net SCI a handsome gain of SGD350m. The transaction is expected to be completed by 4Q15, subject to Australia’s Foreign Investment Review Board’s approval.
What’s Our View
- SembSita contributed SGD33.5m to SCI’s FY14 net profit. 1H15 contribution was only 2.3% of SCI’s SGD365.8m profit as SembSita’s 2H is usually stronger. The sale consideration works out to 14.4x FY14 P/E, which is at the high end of the industry’s low-to-midteens P/Es. As such, we deem it a decent deal.
- We think that SCI could use its cash proceeds of SGD482m (27.0 SG cts/share) to:
- snap up other high-growth energy or water businesses; or
- pay special dividends.
- SCI’s divestment of Sembcorp Bournemouth in the UK in Apr 2015 also netted the company SGD214m.
- We adjust FY15-17 net profits by -4% to +46%, after removing SembSita’s contributions and adding the SGD350m gain. Accordingly, we raise our SOTP TP from SGD3.60 to SGD3.67.
- We are still concerned about Marine’s outlook while Utilities lacks near-term catalysts. But with the cash proceeds, our base-case dividend yield of 4.3% is likely to be maintained, with the potential for upside surprises.
- Maintain HOLD.
Yeak Chee Keong CFA
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2015-09-21
Maybank Kim Eng
Analyst Report
3.67
Up
3.60
