Sembcorp Industries (SCI) reported a 6.3% YoY fall in revenue to S$2.5b and a 13.3% decrease in net profit to S$165.4m in 2Q13, such that 1H13 figures accounted for about 45% of our full year estimates. There was slower order book drawdown in the marine division in the quarter as fewer projects achieved the initial recognition milestone, while 1H13 revenue from the utilities division accounted for about 47% of our full year estimate. As expected, Singapore power spreads were weaker in 1H13 compared to 1H12, but overseas utilities helped to bump up net profit in the quarter. Going forward, management expects the utilities business to deliver a “steady performance” in 2013 despite intensified competition in the Singapore market. Maintain BUY with S$6.48 fair value estimate.
Net profit fell 13% YoY in 2Q13…
Sembcorp Industries (SCI) reported a 6.3% YoY fall in revenue to S$2.5b and a 13.3% decrease in net profit to S$165.4m in 2Q13, such that 1H13 figures accounted for about 45% of our full year estimates. There was a slower order book drawdown in the marine division in the quarter as fewer projects achieved their initial recognition milestones, while 1H13 revenue from the utilities division accounted for about 47% of our full year estimate. Utilities and marine contributed 53% and 39% of SCI’s net profit in 1H13, respectively.
… but would have been flat if GV one-off was excluded
SCI saw a S$24.5m loss in fair value of available-for-sale (AFS) assets, mainly due to Gallant Venture’s drop in share price. Recall that the investment was reclassified as an AFS financial asset on 30 Apr 2013 with SCI’s dilution in stake. Excluding this one-off item, 2Q13 net profit would have been flat vs a year ago. Looking ahead, we understand that subsequent upward revaluations (if any) will be recorded under comprehensive income and will not impact the income statement.
Overseas utilities helped support net profit
Singapore power spreads were weaker in 1H13 compared to 1H12 with greater competition; blended spark spreads dropped by about 15%, within management’s expectations. Meanwhile the utilities business in China helped to bump up profit (S$20.2m in 2Q13 vs S$12.5m in 1Q13) with recently-acquired power assets in the country, while contributions from the rest of ASEAN, Australia and India were higher as well. Going forward, management expects the utilities business to deliver a “steady performance” in 2013 despite intensified competition in the Singapore market.
No change in outlook; maintain BUY
SCI has a good track record in its three main business segments and the long-term outlook for the various segments also look bright, though the Singapore utilities business may, in the short term, be impacted by an expected increase in competition. Maintain BUY with S$6.48 fair value estimate.
Sembcorp Industries (SCI) reported a 6.3% YoY fall in revenue to S$2.5b and a 13.3% decrease in net profit to S$165.4m in 2Q13, such that 1H13 figures accounted for about 45% of our full year estimates. There was a slower order book drawdown in the marine division in the quarter as fewer projects achieved their initial recognition milestones, while 1H13 revenue from the utilities division accounted for about 47% of our full year estimate. Utilities and marine contributed 53% and 39% of SCI’s net profit in 1H13, respectively.
… but would have been flat if GV one-off was excluded
SCI saw a S$24.5m loss in fair value of available-for-sale (AFS) assets, mainly due to Gallant Venture’s drop in share price. Recall that the investment was reclassified as an AFS financial asset on 30 Apr 2013 with SCI’s dilution in stake. Excluding this one-off item, 2Q13 net profit would have been flat vs a year ago. Looking ahead, we understand that subsequent upward revaluations (if any) will be recorded under comprehensive income and will not impact the income statement.
Overseas utilities helped support net profit
Singapore power spreads were weaker in 1H13 compared to 1H12 with greater competition; blended spark spreads dropped by about 15%, within management’s expectations. Meanwhile the utilities business in China helped to bump up profit (S$20.2m in 2Q13 vs S$12.5m in 1Q13) with recently-acquired power assets in the country, while contributions from the rest of ASEAN, Australia and India were higher as well. Going forward, management expects the utilities business to deliver a “steady performance” in 2013 despite intensified competition in the Singapore market.
No change in outlook; maintain BUY
SCI has a good track record in its three main business segments and the long-term outlook for the various segments also look bright, though the Singapore utilities business may, in the short term, be impacted by an expected increase in competition. Maintain BUY with S$6.48 fair value estimate.
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