SINGAPORE (Feb 24): RHB is hanging on to its “buy” call for Sembcorp Industries with a higher target price of $4.17 as it believes the marine business has turned a corner while the utilities business is expected to continue to provide stability to earnings.
In a Friday report, RHB says Sembcorp’s presence in the developing market would continue to support its utilities segment growth. In FY16, about 3,000MW and 40,000 cubic metres/day of power generation and water capacity respectively was completed and commissioned.
This includes two 1,320MW thermal plants in China and India.
Meanwhile, Sembcorp’s marine orderbook stands at $4.7 billion. The stabilisation of crude oil price would be positive for the marine segment, which depends heavily on development capex spending.
Although the marine segment secured only $320 million of new orders in FY16, RHB expects FY17 to be a better year.
“We expect this segment to secure $1 billion of new orderbook in FY17 coming from floaters, offshore platforms and non-drilling solutions. We also expect about 30-40 development projects to be awarded in FY17 compared to six in FY16,” says RHB.
Shares of Sembcorp are down 9 cents at $3.27.
(See also: Sembcorp’s 4Q earnings more than double to $147.5 mil)
