With the completion of the deal, Sembcorp has announced a management share plan so that interests can be aligned, with certain senior managers of Alinta to receive up to 3% of the equity in a new class of non-voting shares.
The analysts are expecting Alinta to contribute core net profit of $115 million in FY2026, and to then increase to $230 to 240 million, post financing costs, on a full-year basis from FY2027 onwards.
According to Lim and Kande, over 60% of Alinta’s 3.4GW portfolio is located on the East Coast, in Victoria and Queensland states.
Citing data from Australian Energy Market Operator (AEMO), they note that the average power prices in these two states during the Mar-Jun 2026 period, post start of US-Iran war, trended -2% to +10% vs. pre-war Jan-Feb period.
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"The largely stable price trend is attributable to higher share of renewables and battery storage," state Lim and Kande.
Alinta aside, the CGSI analysts observe that average Uniform Singapore Energy Price (USEP) for Jun 2026 hit $218/MWh, up nearly 75% from the average S$125 over Jan-Feb 2026.
"We think elevated USEP and ongoing geopolitical uncertainties should drive higher spark spreads for SCI’s Senoko portfolio that is pending recontracting in 2026.
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Based on their ground checks, Lim and Kande note that that spark spreads are ranging between $50 to S$70, depending on the length of the contract.
Citing Sembcorp's "defensive" gas earnings profile, backed by cost through mechanisms and potential upside from gas portfolio optimisation in a tight market here in Singapore, the analysts have reiterated their "add" call and target price, which is based on 12x FY2027 earnings, which is a discount to 16x fetched by peers’ due to Sembcorp's slower earnings growth.
"We think Sembcorp’s current valuation of 9.5x FY2027 P/E is an attractive entry point for investors, and keep Sembcorp as one of our country top picks," they add.
For them, key re-rating catalysts: announcements of new power purchase agreements (PPAs), and value unlocking of renewable energy (RE) assets in India via IPO or asset recycling.
On the other hand, downside risks include prolonged power plant shutdowns, and unfavourable regulatory changes impacting its operations.
Sembcorp shares as at 11.44 am, was down 0.49% to trade at $6.10.
