Sembcorp Industries - RHB Invest 2017-02-24: Better Outlook From Two Main Segments

Sembcorp Industries - RHB Invest 2017-02-24: Better Outlook From Two Main Segments SEMBCORP INDUSTRIES LTD U96.SI

Sembcorp Industries - Better Outlook From Two Main Segments

  • Utilities are likely continue to provide stability to Sembcorp Industries’ earnings, with its presence in key developing power markets. 
  • We believe its marine segment has turned a corner and is expected to register a better performance in FY17. This is with an expectation of a higher orderbook replenishment, helped by the stabilisation of crude oil price. 
  • We continue to maintain our BUY recommendation on Sembcorp Industries with a higher SOP-based TP of SGD4.17 (from SGD3.95, 24% upside).

Utilities on growth path. 

  • Sembcorp Industries’ presence in the developing market would continue to support its utilities segment growth. 
  • In FY16, c.3,000MW and 40,000 cubic metres/day of power generation and water capacity respectively was completed and commissioned which includes two 1,320MW thermal plants in China and India.

Marine orderbook at SGD4.7bn. 

  • The stabilisation of crude oil price would be positive for the marine segment, which depends heavily on development capex spending. 
  • Although FY16 was a low year in terms of orderbook replenishment, securing only SGD320m of new orders, we expect FY17 to be a better year for the marine segment. 
  • We expect this segment to secure SGD1bn of new orderbook in FY17 coming from floaters, offshore platforms and non-drilling solutions. 
  • We also expect about 30-40 development projects to be awarded in FY17 compared to six in FY16.

Maintain BUY, with a SGD4.17 TP. 

  • The expected recovery in the marine segment earnings should provide growth for Sembcorp Industries, supported by stable earnings from its utilities segment. 
  • Key risk to earnings would be a lower- than-expected orderbook replenishment and capacity factor for its marine and utilities segments respectively.

Singapore Research RHB Invest | 2017-02-24
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 4.17 Up 3.400