Sembcorp Industries

Sembcorp Industries: 3Q13 net profit jumped 40.4% y/y to $254.4m (vs consensus of $206m) while revenue improved 31% to $2.97b. Utilities achieved 73% increase in net profit at $172.4m in 3Q13, boosted by gains from Salalah IPO in August ($117m, from a 20% stake sale + fair value gain on remaining 40% interest), offset by impairment for operations in the UK ($48.5m). Marine’s 3Q13 net profits were up 12% to $78.6m from higher operating profit and forex gain, offset by lower interest income and lower contributions from JV and associates. On the Marine side, net order book is $13.5b with deliveries extending till 2019, while the new yard at Tuas began operations in August 2013. Nomura highlighted that regarding the Utilities business, management expects better performance in 2013 vs 2012, highlighting the pipeline of Banyan cogen plan (start up mid 2014) while the 1,320 MW (TPCIL) India power plan is set to commence ops in 4Q14. Deutsche highlights that management guidance is that there should be no more impairment charges for Teeside operations in the UK, as restructuring is completed. Management guided that other businesses are sound going forward. Nomura likes SCI’s strong orderbook, and is optimistic on SCI’s utilities prospects going forward despite competitive outlook. However, CS differs in opinion, citing competitive utilities business as reason to maintain Neutral. MBKE highlights near term catalysts as earnings surprises from overseas ops, while long term prospects depend on pipeline of Utilities projects. Latest broker ratings as follows: Nomura: Maintains Buy at TP: $6.00, CS: Maintains Netural at TP: $5.30 (increased from $5.20) DB: Maintains Hold at TP: $5.40 CIMB: Maintains Outperform with TP: $6.24 (Increased from $5.95) MBKE: Maintains Hold with TP: $5.50 (from $5.48)