Sembcorp Industries - RHB Invest 2016-05-05: All For Utilities

Sembcorp Industries - RHB Invest 2016-05-05: All For Utilities SEMBCORP INDUSTRIES LTD U96.SI 

Sembcorp Industries - All For Utilities

  • Sembcorp Industries’ utilities business would be its main earnings driver, with a visible pipeline of project deliveries unt il FY18. 
  • We think the current weakness in its marine business would be partially cushioned by its utilities segment. 
  • Maintain BUY and SOP-based TP of SGD4.00 (45% upside). 
  • On a standalone basis, NPV for its utilities business stands at SGD2.98.

Utilities to be the main driver. 

  • Sembcorp Industries is expected to deliver four utilities projects In FY16, namely a power plant in India, waste-to-energy facilities in the UK and Singapore, as well as an integrated water management project in China. 
  • In FY17, the company is expected to deliver a 1.3GW power plant in China and a 225MW plant in Myanmar.

Marine segment still challenging. 

  • Net orderbook for its marine business stands at SGD9.7bn, of which c.70% comprises drilling vessels. 
  • Sembcorp Marine (SMM SP, NEUTRAL, TP: SGD1.51) has managed to secure SGD60m worth of new orders YTD.

Urban development chugging along. 

  • Sembcorp Industries’ net orderbook for urban development stood at 236ha as at Mar 2016, of which 81% is composed of industrial and business development, while the remainder is expected to be developed into commercial and residential areas.

Maintain BUY and SGD4.00 TP. 

  • We maintain our BUY call on Sembcorp Industries with our SOP-based TP unchanged at SGD4.00. 
  • Its pipeline of utilities projects would be driving its earnings going forward, partially cushioning the current weakness in its marine business. 
  • The key risk to our call would be lower-than-expected new orderbook wins .

Singapore Research RHB Invest | 2016-05-05
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 4.00 Same 4.00