SCI

SCI: Share price hits a 52-week high, coming in tandem with an article by the Business Times yesterday, where Sembcorp Industries (SCI) guides that it is planning to reactivate its property development subsidiary, Sembcorp Properties, in an attempt to develop residential and commercial properties in its existing industrial parks. With 11 industrial park projects in China, Vietnam and Indonesia currently, the group is guiding for its urban development segment to register a three digit net profit by 2020, versus the current $50m in FY13. Historically, SCI sells land to third party property developers after its land master planning, however following a review, the group believes that it is able to undertake selected residential and commercial property developments, which will enable it to drive new projects and set a quality standard in its township settlement, while enhancing its overall earnings. As a start, SCI aims to focus on mid to high end residential developments in the Singapore-Cichuan Hi-tech Innovation Park in Chengdu and the Sino-Singapore Nanjing Hi-tech Island in Jiangxin zhou, led by high demand for houses in Chengdu and Nanjing. The group also does not rule out partnering other developers in these projects going forward, in a bid to latch on their track record and expertise in property developments. Ultimately, SCI aims for its urban development pillar not to function as a standalone unit, but to synergise and complement its power and water management capabilities. At the current price, SCI trades at 11.8x forward P/E versus closest peers Keppel Corp’s 12.4x and ST Engineering’s 19.7x. Overall, the street has 10 Buy, 4 Hold and 1 Sell call ratings with a consensus TP of $5.79.