Chew views the deal “positively” for SCI and as a “strategic entry” into a new source of sustainable growth. He writes that the deal is patmi accretive by 23% on a pro-forma basis excluding amortisation for 12 months earnings ended June, with enterprise value to ebitda experiencing a modest drop to 8.3 times.
Another silver lining of the transaction is Alinta’s pipeline of 10.4 GW of renewables which provides growth visibility for SCI. Chew notes that the draft of Australia’s integrated system plan spells out that grid-scale wind and solar will more than double to 58 GW from the current 23 GW, as well as more than quintupling to 120 GW by 2050.
Yet, there also seems to be some concerns for Chew. He points out that with net debt climbing $5.8 billion to $13.6 billion, SCI’s net debt to ebitda will rise from 3.6 times to 4.6 times. Secondly, he notes the probability of high margin volatility as the Australian energy market has fewer long-term contracts than the Singapore market.
On a separate note, Chew is lowering estimated ebitda and net profit (presumably for FY2025) by 7% and 12 % respectively due to “lower” electricity spread assumptions for Singapore. He also writes that the growth potential of China is “fading” while the listing of SCI’s renewable energy assets in India would “dilute” the company’s growth prospects but yet provide deleveraging.
See also: As SGX enters its new phase of growth, analysts are upbeat (update)
The counter rose by 13 cents or 2% from the previous trading day to $6.05 at around 11:54am on Dec 15.
