Samantha Chiew  1/06/2020, 11:35am

 

SINGAPORE (June 1): DBS Group Research&rsquo s analyst Ho Pei Hua is upgrading her call on Sembcorp Industries to &ldquo buy&rdquo from &ldquo hold&rdquo previously with an unchanged target price of $1.70.
Sembcorp was sold down by 10% last Friday, underperforming the Straits Times Index (STI) and Sembcorp Marine (SembMarine) by 12% and 8% respectively over the past one week.
&ldquo We believe the sell-off was due largely to its removal from MSCI Index, pushing valuation to an unwarranted low of 0.34 times price-to-book ratio,&rdquo says Ho.
The analyst is hold on to her view of a potential merger between Keppel&rsquo s Offshore & Marine  arm and SembMarine, given the keen competition within the sector.
&ldquo We believe a spin-off of its marine arm could re-rate Sembcorp&rsquo s  undervalued utilities business (by at least 30% or 40 cents/share), which is currently overshadowed by the cyclical marine business,&rdquo says Ho.
Meanwhile, Sembcorp&rsquo s operations in emerging markets seem promising and are looking to be its long-term growth engines.
Sembcorp&rsquo s India operations swung from a loss of $58 million in FY17 to a profit of $32 million (excluding one-offs) in FY19, and growth would help to drive group earnings. Besides India, Sembcorp  has also made forays into other emerging markets &ndash Bangladesh, Vietnam and Myanmar.   
Non-marine segments have been overshadowed by exposure to the cyclical marine sector.
We believe there is room for upward revision in non-marine&rsquo s valuation multiple to 0.6- 0.7 times price-to-book value as operating environment in India, the UK and Singapore improves, partially offset by some downside risks to SembMarine  as order wins momentum could be slower than expected amid global capex cut,&rdquo says Ho.
As at 11.30am, shares in Sembcorp Industries  are trading at $1.41 with a dividend yield of 3.3%.

https://www.theedgesingapore.com/capital/brokers-calls/sembcorp-now-too-cheap-ignore

JUN 1, 2020 02:13 PM

DBS Group Research has upgraded Sembcorp Industries (SCI) to " buy" from " hold" with an unchanged target price of S$1.70. 

SCI shares were trading S$0.06 or 4.4 per cent higher at S$1.42 as at 1.50pm on Monday.

The sell-off in SCI shares was likely due to the company' s recent removal from the MSCI Index, said the research team in a note on Monday.  DBS analyst Ho Pei Hwa also called SCI " too cheap to ignore" .

The sell-off had pushed SCI' s valuation to an " unwarranted low" . Ms Ho added that there is 25 per cent potential upside on the stock.

SCI' s earnings are expected to remain in positive territory with mid-single-digit return on equity (ROE), the note added.

While subsidiary Sembcorp Marine' s (Sembmarine) ROE has deteriorated from a peak of greater than 30 per cent before the global financial crisis to be loss-making in recent years, the non-marine business should continue to deliver steady ROE at around the mid-to-high single digits.

Spinning off the group' s marine arm could result in the re-rating of SCI' s undervalued utilities business by at least 30 per cent or 40 Singapore cents per share, the report noted.

Potential restructuring between SCI and Keppel Corp also remains a wild card, with largest stakeholder Temasek' s partial offer for Keppel seemingly progressing well, Ms Ho said.

Sembmarine shares were trading S$0.01 or 1.5 per cent higher at S$0.69 as at 1.50pm on Monday.
 

Samantha Chiew  1/06/2020, 11:35am
 

SINGAPORE (June 1): DBS Group Research&rsquo s analyst Ho Pei Hua is upgrading her call on Sembcorp Industries to &ldquo buy&rdquo from &ldquo hold&rdquo previously with an unchanged target price of $1.70.