UOBKayhian on 18 Feb 2015
FY15F PE (x): 9.4
FY16F PE (x): 8.7
Above expectations. Sembcorp Industries (SCI) posted a net profit of S$241m and
S$801m for 4Q14 and 2014 respectively. 2014’s net profit was 4% of our forecast of
S$772m. We attribute this to better-than-expected marine earnings. Marine operating
margin was sharply higher at 16.1% vs 10.0% in 3Q14 and 11.1% in 4Q13. This was
due to repeat orders and greater efficiency. Excluding a net exceptional gain of S$69m
from 2013’s earnings, utilities net profit grew by 7% from S$381m in 2013 to S$408m in
2014. The net exceptional gain in 2013 was due to a S$117.1m gain from the Salalah
IPO and net of S$48.5m impairment from UK Teeside.
Powering ahead. SCI will continue to power ahead with 3,000MW (+76%) of power and
close to 1.5m m3/day (+21%) of water and wastewater treatment capacities which will
come on stream in 2014-16. The largest capacity additions are two power plants –
totaling 2,640MW in India. SCI’s Banyan Cogen (Singapore) is completed and in
operation. TPCIL’s (India) first 660MW unit is currently pre-commissioning with
commercial operations to have occurred at end-14. NCCPP (India) and Fujairah 1
desalination expansion (UAE) are more than half complete.
Maintain BUY and target price of S$5.20 which is pegged to our revised SOTP
valuation. We value SCI’s utilities business at 2016F PE of 12x 2016F PE and SMM at
S$2.93/share (based on 2016F PE of 9.5x, assuming Brent oil price at US$70/bbl). We
maintain our BUY call.
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