SCI/ SMM: CIMB believes it is not the right time for SCI to take SMM private given the murky fate of Sete Brasil and the challenging offshore market. DPS cuts become more likely and utilities need capital for growth in India, China, Myanmar and Bangladesh.
Stripping out SMM, SCI’s utilities business is worth $2.00/share on DCF (implied P/E of 10x CY16 or 0.8x book value) and industrial parks at $0.47 (at book value). This translates to zero value from SMM, which CIMB deems as illogical. House maintains Add with TP of $3.85 for SCI. Potential re-rating catalysts are stronger-than-expected earnings from utilities and partial settlement of payment from Sete Brasil in SMM.
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