Sembcorp Industries

UOBKayhian on 27 Feb 2014

FY14F PE (x): 13.7
FY15F PE (x): 12.4
Within our expectation. Sembcorp Industries (SCI) reported a net profit of S$224m
(+9% yoy) and S$820m (+9% yoy) for 4Q13 and 2013 respectively. 2013 net profit was
in line with forecast of S$817m. The utilities segment registered a 20% yoy increase in
net profit to S$450m in 2013, primarily due to strong performance in China and gains
from the IPO of Salalah in Oman. However, there was a provision S$48.5m in the UK
operation. While the marine segment’s total revenue increased by 25% yoy to US$5.5b
on higher rig building revenue, net profit grew only 3% to S$337m due to lower profit
margins.

Target price lowered from S$6.00 to S$5.95. Our target price is pegged at 10%
discount to our sum-of-the-parts valuation. We have reduced our target price for SMM
from S$4.60 to S$4.23. However, this was partially offset by a higher valuation for SCI’s
utilities segment, which has been rolled over by one year and is now pegged at 2015F
PE of 12x. We lower our 2014-15 net profit forecasts marginally by 2-3%, primarily due
to lower earnings forecasts for Sembcorp Marine. We initiate our 2015 forecast at
S$1b.