Sembcorp Industries - RHB Invest 2020-07-20: Underlying Energy Strength Despite 1H20 Loss

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

Sembcorp Industries - Underlying Energy Strength Despite 1H20 Loss

  • Sembcorp Industries (SGX:U96)'s 1H20 net loss of SGD131m – which included an exceptional loss of SGD191m – was a sharp reversal from 1H19’s SGD191m profit.
  • Whilst we forecast an FY20 net loss, we remain positive on Sembcorp Industries on its energy and urban segments driving future growth, as well as the stoppage of bleeding from the marine business after the de-merger with Sembcorp Marine (SGX:S51).
  • Keep BUY and SOP-derived SGD2.11 Target Price, 19% upside and c.2% FY21 yield. 





Underlying strength from the energy business.

  • The energy segment recorded a 1H20 net loss of SGD5m. Excluding exceptional items, this unit’s SGD156m net profit was down 15% y-o-y, mainly due to the adverse impact of COVID-19. Sembcorp Industries is strengthening its renewables portfolio, and was recently awarded a contract to design, build, own, and operate a 60MW- peak floating solar farm on the Tengah Reservoir. Sembcorp Industries is also actively supporting India’s renewable energy ambitions.
  • India is major contributor to energy profit from operations (PFO), accounting for SGD186m, or 45% share of PFO before exceptional items. China accounted for a 17% share.


The urban segment’s 1H20 net profit doubled YoY

  • Sembcorp Industries urban segment’s 1H20 net profit doubled y-o-y to SGD38m, driven by strong land sales at Nanjing Eco Hi-tech Island and Kendal Industrial Park. However, there was lower demand in Vietnam due to COVID-19.


The marine segment’s loss was a major setback.



We now forecast an FY20 net loss of SGD30m

  • We now forecast an FY20 net loss of SGD30m vs our and consensus’ FY20F pre-results profit expectations of SGD315m and SGD295m.
  • For FY20, management guided for losses, but expects positive operating cash flows. Excluding the exceptional items, we forecast recurring FY20 net profit of SGD186m (1H20: SGD60m). We also estimate FY21 recurring earnings to double y-o-y.


Target Price for Sembcorp Industries






Leng Seng Choon CFA RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-07-20
SGX Stock Analyst Report BUY MAINTAIN BUY 2.110 SAME 2.110



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