SCI

SCI: HSBC likes SCI for its stability of business and its 10-15 year supply contracts, and expects power capacity to increase 70%+ and water capacity 20%+ in 2014-16. That said, bright utilities outlook is dampened by challenges by subsidiary Sembcorp Marine, faced with a weak rigbuild order market and margin pressure from expansion and Petrobras orders, which HSBC expects to only recede in 2015. Therefore, HSBC cuts SCI’s consolidated profit forecast for FY14-15 by 9-10% with a lion’s share of the cuts driven by SMM, plus the deconsolidation of Sembcorp Salalah Power and Water in Oman following its IPO. As such, HSBC downgrades SCI to Neutral and TP falls to $5.75 from $5.95.