• S$0.17 total dividend for 2013
• Mostly positive outlook for 2014
• FV dips from S$6.67 to S$6.42

FY13 results within expectations

Sembcorp Industries (SCI) saw FY13 revenue rising 6% to S$10797.6m, or about 3% above our forecast (met consensus), driven by the 25% growth in its marine segment to S$5522.7m, which also negated the 9% drop in utilities revenue to S$5095.3m. Reported net profit climbed 9% to S$820.4m; but excluding exceptional gains of S$35.5m (S$117m gain from the IPO of Salalah and S$48.5m impairment of Teesside being the main items), we estimate that core earnings would have been around S$784.9m, which is almost spot on our forecast (2% above consensus). SCI declared a final dividend of S$0.15/share as well as bonus dividend of S$0.02, bringing the total payout to S$0.17 versus S$0.15 last year.

Sustainable long-term growth

In 2014, SCI expects its utilities’ underlying core business to deliver a steady performance compared to 2013; also sees continued growth from its overseas operations. SCI adds that it should have made sufficient provisions for Teesside in 2013. For its marine segment, SCI highlights the net S$12.3b order book which offers visibility out to 2019; but also notes that margins remain challenging in anticipation of the tight labour supply situation in Singapore. Lastly, for its urban development business, SCI expects to see a better performance in 2014, underpinned by land sales in new urban developments in China and Vietnam. As such, SCI believes it is wellpositioned to deliver sustainable long-term growth.

Marginal tweaks to our FY14 forecasts

In light of the results and the guidance, we made some very minor tweaks to our FY14 estimates – all less than 1% change. We also maintain our BUY rating on the stock. But to reflect our recent adjustment in SembMarine’s fair value (from S$5.68 to S$5.26), our SOTP-based fair value slips from S$6.67 to S$6.42.

Source: OCBC Research - 27 Feb 2014