SEMBCORP INDUSTRIES LTD
U96.SI
Sembcorp Industries (SCI SP) - Bangladesh foray
- To develop a greenfield 426MW power plant in Bangladesh at total cost of USD390m (SGD547m).
- 22.5-year PPA with Bangladesh Power Development Board. Maiden contribution expected only from 2018.
- HOLD, with SOTP TP of SGD3.67. We remain concerned about outlook for Marine, and Utilities lack near-term catalysts, but this stock is supported by 4.2% yield with upside potential.
What’s New
- SCI is developing a 426MW power plant in the Sirajganj district of Bangladesh under a public-private partnership with the Government of Bangladesh. This will be a build-own-operate project where SCI will hold a 71% stake while North-West Power Generation Company, a Bangladesh Power Development Board subsidiary (BPDB), will hold the remaining 29%.
- The plant is expected to be completed in 2018 and has secured a 22.5-year PPA with BPDB. Total project cost is estimated at USD390m (SGD547m).
- SCI’s equity portion will be USD68m (SGD95m) with the remaining to be funded through project financing.
What’s Our View
- We estimate initial contribution of SGD10-15m p.a to SCI’s earnings when operational in 2018, possibly rising to SGD25-30m p.a eventually. But the longer-term implication is that SCI could expand its Bangladesh footprint if this project progresses well, given the lack of domestic opportunities.
- Bangladesh plans to add 10GW of power capacity over the next decade and SCI is the first foreign investor to enter into a public-private partnership project.
- No change in our FY15-17E EPS and SOTP TP of SGD3.67 where we value Utilities at 11x FY16E P/E.
- We remain concerned about Marine’s outlook and see a lack of catalysts for Utilities in the near term. But 4.2% dividend yield is likely to be sustained with upside potential given recent proposed divestment of SembSita that could net the company SGD482m in cash.
- Maintain HOLD.
Yeak Chee Keong CFA
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2015-09-29
Maybank Kim Eng
Analyst Report
3.67
Same
3.67
