See: Sembcorp reports 50% rise in 2Q18 earnings to $82 mil; Marine unit still mired in losses
“While Sembcorp’s management has been consistently guiding to this outcome, the profitability of its Indian utilities business has lingered as an area of concern in the market, as evidenced by the de-rating of SCI’s stub value,” says analyst Conrad Werner in a Friday report.
Sembcorp’s Indian utilities business achieving profitability was the highlight in the conglomerate’s 2Q18 results, in Macquarie’s view.
The turnaround in India was led to a strong overall 2Q18 headline PATMI of $82 million and 2Q18 clean PATMI of $94 million, which was down 18% y-o-y due to the weak results in Sembcorp Marine, which reported two weeks ago.
Macquarie had pencilled in only $49 million, so the result was “much better than expected”.
That said, the house thinks the uplift to consensus will be limited to mid-single digit type percentages given the poor outlook statement from Marine.
In contrast, Sembcorp’s utilities business in Singapore posted solid results while India experienced a big turnaround.
“Singapore’s revenue growth of 23% can be a bit misleading given its linkage to commodity prices, but in our view the 4% y-o-y increase in net income for both 2Q18 and 1H18 is a creditable performance against a competitive backdrop,” says Werner.
The presentation cites higher load factors and better spreads in India which, along with the benefits of refinancings would have led to this improvement.
As at 4.34pm, shares in Sembcorp are trading 2 cents higher at $2.64 or 8.6 times FY19F earnings.
