SembCorp Industries

SembCorp Industries: Results above Street estimates- revenues surprised by 2.4%; FY12 revenues up 13% to $10.2b, net profits declined 7% to $$753.3m; Utilities made up 48% (up from 37% in FY11) and Marine made up 42% (down from 55% in FY11) of Group's profits. FY12 Profit margins for Utilities segment at 10.8%, Marine segment at 13.5%; compared to 8.6% for Utilities and 20% for Marine in FY11. Earnings from Utilities grew 23% y/y to $374.6m, helped by the addition of 3 new plants in FY12 which provided new earnings stream. Earnings from Marine business declined 28% y/y to $326.7m, mainly due to lower margin from new design rigs including the first of seven drillships for Sete Brasil, and resumption of margin recognition on completion and delivery of the Songa Eclipse semi-submersible rig in FY2011. Earnings from Urban Development increased 6% y/y to $41.1m Going forward into FY13, the Utilities segment should see continued increase in performance due to the completion a new renewable energy plant in Jurong Island, as well as the recently-acquired power assets in China. The segment has achieved a CAGR of 20% over the last 10 years, providing the Group with a greater recurring income. Mgmt targets a total of 10,000 MW of power capacity vs its 5,800 MW capacity currently, although no timeline has been stated. Marine orderbook of $13.6b stretches till 2019, which is made up of $11b in orders secured in 2012, and $900m secured in Feb 2013. Group's new yard at Tuas will commence operations in the 2H13, and the construction of the Brazilian yard is on track to full completion by end-2014. Group proposed a dividend of 15¢; indicative yield of 2.9%; Group trades at 12.3x P/E, just below the 5-yr historical +1 s.d. of 12.8x; Peer Keppel Corp trades at 9.2x P/E, under the 5-yr historical average of 10.7x; Note however that a direct comparison can't be made, due to Keppel's property segment. UOB KH maintains BUY with TP of $6.10; DB reiterates BUY with TP of $6.35; Nomura maintains BUY with TP of $6.00; CS maintains OUTPERFORM, reduces TP to $5.90 as a result of reducing operating margin forecasts; CIMB maintains OUTPERFORM with TP of $6.26;