- 3Q14 below due to Marine’s underperformance. Cut FY14E-16E EPS by 1-6%.
- Utilities’ domestic-power business weak. Pending offset from new overseas projects.
- Maintain HOLD with SOTP TP cut from SGD5.03 to SGD4.75 after updating components.
3Q14 PATMI of SGD196.6m, down 22.7% YoY but up 9.8% QoQ, was below expectations due to SMM’s underperformance. Adjusting for one-offs of SGD68.6m last year, 9M14 PATMI rose 6.1% YoY to SGD560.5m. This forms 67% of our FY14E forecast and 70% of the market’s. Management guides for steady core Utilities earnings in FY14.
Focus on overseas pipeline
SCI’s power business in Singapore remains under pressure from low spark spreads. These were down 3% QoQ and 33% YoY from intense competition from new capacity. Its 1,320MW TPCIL power plant in India should help to lift Utilities profits next year once it starts operating.
SCI continues to focus on executing and acquiring new overseas projects to diversify its exposure. It recently signed a conditional agreement to collaborate on a 1,620MW mine-mouth coal-fired power project in Chongqing, China. We believe more significant growth could materialise only from FY16, with the proper ramp-up of a few other projects.
We cut FY14E-16E EPS by 1-6% as we factor in SMM forecasts. Our SOTP-based TP falls to SGD4.75 from SGD5.03 as we update its components. Maintain HOLD. We could turn more positive on: 1) better Marine execution and order wins; 2) a stronger Utilities from earlier/more overseas projects; and 3) higher spark spreads.
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