CIMB REPORT
Sembcorp Industries
Not the right time to privatise SMM
■ We believe it is not the right time for SCI to take SMM private given the murky fate of Sete Brasil and the challenging offshore market. DPS cuts become more likely. ■ Utilities needs capital for growth in India, China, Myanmar and Bangladesh.
■ At SCI’s current price, the market is ascribing zero value to SMM. We estimate that utilities and industrial parks alone are worth S$2.47/share.
SMM is zero value in SCI’s SOP
● Stripping out SMM, SCI’s utilities business is worth S$2.00/share on DCF (implied P/E of 10x CY16 or 0.8x book value) and industrial parks at S$0.47 (at book value). This translates to zero value from SMM, which we deemed as illogical.
● We maintain our Add call and SOP-based target price. Potential re-rating catalysts are stronger-than-expected earnings from utilities and partial settlement of payment from Sete Brasil in SMM.