SEMBCORP INDUSTRIES LTD
U96.SI
Sembcorp Industries: Final dividend of S$0.06/share as expected
- Disposal gains offset marine’s losses
- Overseas utilities growing well
- Full year dividend of S$0.11/share, as expected
S$60.8m profit in 4Q15 despite marine’s huge loss
- Sembcorp Industries (SCI) reported a 9.2% YoY drop in revenue to S$2.42b and a 74.7% fall in net profit to S$60.8m in 4Q15, bringing full year net profit to S$548.9m.
- Excluding the dismal performance by the marine segment (market was warned of what was to come after Monday’s earnings release), SCI’s results were within expectations as both the utilities and urban development segments delivered healthy earnings.
- Excluding one-off items worth about S$301m mostly due to disposal gains, net profit for the utilities segment was S$94m vs. S$90m in 3Q15 and S$109m in 4Q14.
- Urban development’s net profit was S$16m in 4Q15 vs. S$5m in 3Q15 and S$15m in 4Q14.
On the latest talk in town
- Responding to questions whether SCI could be short of cash to pursue certain investment opportunities, the group’s CEO, Mr. Tang Kin Fei, stated that SCI is adequately funded, and is not short of capital to grow its business.
- With regards to whether a privatisation of SMM by SCI would make sense, Mr. Tang reiterated that whatever SCI does, the move must be accretive to shareholders. If SMM is able to operate as a standalone company, SCI does not see a need to pump in further funds in SMM when the outlook is still murky, unless the price is too good to refuse.
Full year dividend of S$0.11/share, as expected
- SCI declared a final dividend of S$0.06/share (vs. S$0.11/share last year), bringing full year dividend to S$0.11/share (vs. S$0.16/share last year).
- This represents a payout ratio of 38% and dividend yield of ~4.3% and is in line with our forecast, as per our earlier report “Utilities Undervalued”.
Lower FV to S$3.21
- We have decreased our fair value estimate for SMM to S$1.08, and with a lower multiple of 8.5x for utilities due to lower valuations in the broader market, our fair value estimate for SCI is now S$3.21, based on our sum-of-parts valuation.
- Maintain BUY; key risks include greater than expected provisions by SMM due to the uncertain Brazil situation and potential order cancellations, as well as a privatisation of SMM by SCI at an unattractive price.
Low Pei Han CFA
OCBC Securities
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http://www.ocbcresearch.com/
2016-02-18
OCBC Securities
Analyst Report
3.21
Down
3.42
