Tuesday, 11 August 2015

Sembcorp Industries

UOBKayhian on 5 Aug 2015

FY15F PE (x): 8.4
FY16F PE (x): 8.3

Results were within our expectation. Sembcorp Industries (SCI) reported a net profit of S$366m in 1H15, 48% of our 2015 forecast. The profit included an exceptional gain of S$54.6m arising from the disposal of its UK municipal water operations in 2Q15. Management had earlier flagged it in their 1Q15 results. 2Q15 net profit was S$224m. Excluding the exceptional gain, net profit would have been S$169m, which was higher than 1Q15's net profit of S$142m. Overseas power utilities to expand 25% in 2015. Sembcorp is expected to expand its effective power generation capacity by 25%, 24% and 14% yoy in 2015-17 respectively. India dominates in SCI’s capacity expansion. Projects in the 2015 pipeline include (on a gross capacity basis) 120MW of wind assets from Green Infra and 1,320MW from the TPCIL in India, and 300MW from the Chongqing power plant (pending approval). Target price is also tweaked marginally from S$5.10 to S$5.00, based on sum-of-theparts valuation. We factor in our marginally revised target price of S$2.91 for SMM and value SCI’s utilities business at 12x 2016F PE. Maintain BUY.

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