SEMBCORP INDUSTRIES LTD
U96.SI
Sembcorp Industries: Steady performance from utilities
- Recurring net profit in line.
- 2H16 to see better TPCIL performance.
- S$0.04/share interim dividend.
2Q16 core net profit in line
- Sembcorp Industries (SCI) reported a 22.7% YoY fall in revenue to S$1.8b and a 61.8% drop in net profit to S$86.5m in 2Q16. 2Q15, however, was boosted by S$54.7m disposal gains from the sale of Sembcorp Bournemouth Water Investment in Apr 2015, while 2Q16 saw forex loss of S$43.0m, mainly from Sembcorp Marine’s revaluation of assets and liabilities that were denominated in GBP and USD.
- Stripping out one- off items, we estimate core net profit fell by about 37% YoY to S$125m in 2Q16, such that 1H16 core net profit accounted for 55% of our full year figure; hence within expectations.
Overseas utilities buttressing earnings
- Utilities saw a 20% YoY drop in turnover to S$894.7m, but was flat QoQ; utilities net profit of S$74.6m was also similar to 1Q16’s S$75.2m.
- Singapore operations remained weak, and we understand that power spreads was marginally lower from 1Q16.
- On a YoY basis, overseas operations in India, China and the Middle East performed better, but were relatively stable on a QoQ basis.
Updates on India operations
- Average power load factor for the TPCIL plant in India was 69%, unsurprisingly lower than 83% in 1Q16 due to the shutdown of unit 2 in the quarter as mentioned in our earlier report. As the unit is now operating well, utilization should revert to normal, barring unexpected circumstances. For TPCIL, 86% of net capacity (1,070MW) has already been contracted under two long-term PPAs.
- As for the Sembcorp Gayatri Power plant (SGPL) which is under construction, short-term PPAs have been secured and SCI is currently bidding for a 500MW long-term PPA with Andhra Pradesh.
Interim dividend of S$0.04/share
- In line with our expectations, the group has declared an interim dividend of S$0.04/share (payout ratio 41%), vs. S$0.05/share in 1H15.
- Looking ahead, management expects 2H16 to see better contributions from TPCIL, and the SGPL plant will also be completed by end 2016.
- Utilities in China are expected to deliver a steady performance, and we like the long-term growth prospects of the company which has exposure to developing markets.
- Maintain BUY with S$3.07 fair value estimate.
Low Pei Han CFA
OCBC Securities
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http://www.ocbcresearch.com/
2016-08-03
OCBC Securities
Analyst Report
3.07
Same
3.07