Sembcorp Industries - CGS-CIMB Research 2018-10-01: Legal Proceedings In Water Utilities

SEMBCORP INDUSTRIES LTD (SGX:U96) | SGinvestors.io SEMBCORP INDUSTRIES LTD SGX:U96

Sembcorp Industries - Legal Proceedings In Water Utilities

  • Sembcorp Industries’ overseas majority-owned JV in the wastewater treatment business was served with a notice for an alleged discharge of off-specification wastewater. 
  • Provision of S$25.4m was already made in FY17 results. The maximum potential claims and fines could amount to S$100m, inclusive of provisions previously made. 
  • If full additional provisions of S$75m are made, Sembcorp Industries’ earnings will be reduced by 24% in FY18F or 17% in 2019F. 



Provision of S$25.4m made in FY17

  • Sembcorp Industries disclosed a provision of S$25.4m made in FY17 relating to an alleged discharge of off-specification waste water by its overseas majority-owned waste-water treatment JV.

~ SGinvestors.io ~ Where SG investors share
  • The latest developments in the case reveal a further S$100m, inclusive of provisions previously made.


Impact on group

  • We suspect the operations referred to 24% in FY18F or 17% in 2019F.
  • We anticipate some profit taking on recent strength in its share price.


Maintain ADD and Target Price of S$3.49, based on SOP

  • We retain our ADD call and SOP-based target price.
  • Consistent performance of its India business is a key catalyst.
  • Litigation noise is a key risk.





LIM Siew Khee CGS-CIMB Research | https://research.itradecimb.com/ 2018-10-01
SGX Stock Analyst Report ADD Maintain ADD 3.490 Same 3.490



Advertisement



MOST TALKED ABOUT STOCKS / REITS OF THE WEEK



loading.......



ANALYSTS SAY


loading.......