SEMBCORP INDUSTRIES LTD
U96.SI
Sembcorp Industries - Expecting a Stronger 2017
- We expect Sembcorp Industries’ short to mid-term performance to be driven by its utilities segment as several overseas power plants commence operations, while its marine arm takes a back seat.
- The marine segment’s orderbook stands at SGD5.2bn but orderbook replenishment continues to be slow, with only SGD320m added YTD. On a standalone basis, NPV for the utilities business stands at SGD2.70/share.
- Maintain BUY with revised SOP-based TP of SGD3.40 (from SGD3.90, 37% upside).
Utilities to remain earnings driver for Sembcorp Industries.
- The third unit of its power plant in India and the first unit of the Chongqing power plant are expected to start commercial operations in 4Q16.
- Overseas operations (where net profit was up 20% in 9M16) are expected to continue to drive group earnings, underpinned by better performances in China, India and Middle East.
Mid-term outlook for marine still sluggish.
- Sembcorp Marine’s (SMM SP, NEUTRAL, TP: SGD1.33) orderbook stands at SGD5.2bn, excluding Sete Brasil’s drillships contracts worth SGD3.2bn.
- The fabrication arm is shifting its focus to non-drilling solutions although this has yet to bear fruit, with YTD orderbook replenishment coming in at only SGD320m.
Steady performance at urban development.
- Vietnam continues to drive the urban development arm’s performance. Net orderbook for the segment stands at 277 hectares, 76% of which from industrial and business, and the remainder from commercial and residential development.
Maintain BUY with SOP-based TP of SGD3.40.
- Sembcorp Industries’ slew of utilities projects in the pipeline should continue to drive earnings, cushioning weakness at its marine business.
- Key risk to earnings includes lower-than- expected orderbook replenishment.
Singapore Research
RHB Invest
|
http://www.rhbinvest.com.sg/
2016-10-31
RHB Invest
SGX Stock
Analyst Report
3.40
Down
3.900
