Sembcorp Industries - OCBC Investment 2019-11-15: Patience Needed

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

Sembcorp Industries - Patience Needed

  • Energy 9M19 net profit up 5%.
  • But insufficient to offset drag from Marine.
  • Marine’s FY19 losses to be worse than FY18.



Dragged by Marine



Singapore to see maintenance shutdowns in 2H19

  • In Singapore, completion of the sale of certain utilities facilities to ExxonMobil Asia Pacific is expected by the end of this year. Major maintenance shutdowns for the power generation assets in Singapore will also take place in 2H19.


Energy division’s net profit up 5% in 9M19

  • In the Energy division, net profit before exceptional items was 17% lower at S$84m in 3Q19, while net profit after exceptional items was 10% lower at S$81m.
  • On a 9M19 basis, net profit was 5% higher at S$258m, demonstrating the relatively steady nature of the business.


Marine drag to continue

  • As mentioned in our earlier report, though Sembcorp Industries’ Energy and Urban Development segments are operating well, the Marine segment may pose a greater than expected drag on the group. A sustained recovery in new orders will take some time, and competition remains intense with margins compressed. Instead of full year losses projected to be similar in range to last year’s, they are now expected to be even worse than FY18.
  • We update our estimates and our SOTP-based value for Sembcorp Industries drops from S$2.79 to S$2.51. See Sembcorp Industries Share Price; Sembcorp Industries Target Price





OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2019-11-15
SGX Stock Analyst Report HOLD DOWNGRADE BUY 2.51 DOWN 2.79



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