Sembcorp Industries recently announced that its power plant in Chongqing has commenced full commercial operation following the completion of its second 660MW unit; the first unit was completed in Nov 2016. According to SCI, the S$966.5m power plant is one of the most efficient power plants in Chongqing. It was developed by a 49:51 JV between a subsidiary of SCI and a subsidiary of Chongqing Energy Investment Group, which is owned by the Chongqing municipal government.

Having invested in China for over two decades, SCI’s presence now spans 15 provincial regions, and we remain positive over the company’s longterm prospects.

Meanwhile, the stock is already up 12% YTD vs the STI’s 6% appreciation over the same period, and is now close to our fair value estimate of S$3.36. It also closed at S$3.27 on 24 Jan, which was a 52-week high.

Post Keppel’s FY16 results which saw significant impairments, there could be a dampening of sentiment on oil-related plays, barring positive surprises in the oil price. We maintain our BUY rating on SCI on a longer term basis, with dips presenting opportunities to accumulate.

Source: OCBC Research - 31 Jan 2017