Sembcorp Inds not expected to get immediate boost despite securing 20-yr utilities contract from anchor customer Jurong Aromatics Corp to supply of steam & other water and wastewater treatment services in a new multi-utilities facility on a new zone in Jurong Island. Costing $800m, the new multi-utilities facility & cogen plant will have a capacity of 400MW & 350 tph of steam when completed by 3Q13.
This capacity addition is significant - currently, SCI's cogen plant in the Sakra district of Jurong Island produces about 815MW. Singapore utilities already contribute ~$130m or 62% of utilities earnings (18% of group earnings) and this new investment is expected to add $30-60m annually to future earnings, which may mitigate the dependence on O&M earnings.
DB reiterates it Buy call with TP of $5.56, citing that continued rerating of its utilities business. The group's UK ops should also bottom out this year & Cascal should contribute from 2H10. Potential demand for utilities services remain healthy across the region with China performing well. In Vietnam, SCI is keen to buy over BP's 1/3 stake in Phu My 3 power plant (SCI already has a 1/3 stake), which has been profitable since operations began in 2004 & is a steady earnings contributor.
In the UK, it may invest in a 35MW WTE plant while in Spore, it is well positioned to benefit from PUB's water-related projects. UBS also has Buy call with $4.81 TP while KE is putting a Hold with TP of $4.38.
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