All segments performed except for Marine. Sembcorp Industries (SCI) reported 3Q12 revenue of SGD2,274m (-14% YoY, -15% QoQ) with corresponding PATMI of SGD181.2m (-19% YoY, -5% QoQ). Except for weaker performance from the Marine segment, other business segments were generally in line with expectations. 9M12 net profit made up 69% of our previous FY12F forecasts. Maintain BUY but our SOTP-based TP is reduced marginally to SGD6.30 on lower Marine segment valuations.

Utilities continues to lead. Utilities segment continues to lead the growth with 9M12 net profit coming in higher by 36% YoY, accounting for 52% of group net profit. This was largely driven by higher additional gas sales in Singapore and contribution from the Salalah IWPP. Scheduled plant maintenance for Singapore Cogen plant would most likely take place from end-4Q12 to early-1Q13, resulting in weaker contribution for those periods. We also expect to see some softening in power prices with new capacities coming on-stream in 2013 from several competitors, which include SCI itself.

In the pipeline. The second cogen plant on Jurong Island has achieved 65% completion in Sep 2012 and is on track for commissioning by end 2013 while its India coal-fired power plant is also on track for first phase completion in 2Q14. These would provide the key earnings upside for the Utilities segment for FY14F.

Sowing more seeds. SCI has planted more seeds with recent plan to invest about RMB326.6m to develop centralised utilities facilities in Fushun Hi-tech Industrial Zone in Liaoning province, China. In the Urban Development segment, it has 10,257ha of gross land bank which could be developed, although we expect muted performance in near term for this segment as the global economy remains weak.

Undervalued Utilities segment. We trim FY12-14F net profit figures by 1-3%%. Stripping out other business segments, Utilities valuations still look extremely attractive, trading at implied FY13F PER of about 6.3x. We also believe that Marine segment’s recent underperformance is not structural but due to timing issues. Maintain Buy.

Source: Maybank Kim Eng Research - 12 Nov 2012