Higher electric demand lifts Sembcorp Industries

Its first quarter results will see robust revenues from its utilities business, says Phillip Securities.

Other upcoming projects including the Salalah Independent Water Power Plant and Jurong Island co-gen and slated for the next couple of years should sustain its earnings stride, but expect a downside from a shutdown of its Singapore co-gen plant.

Here's more from Phillip Securities:

Company Overview. Sembcorp Industries is a Singapore-listed conglomerate with assets totalling more than S$10 billion. The Group is primarily involved in the utilities, marine and integrated urban development. Expect 1Q12 contributions from utilities business to remain strong.

What is the news? According to data from EMC, electricity demand in Singapore has remained strong in the first quarter of the year.

How do we view this? We expect 1Q12 results from its utilities business to remain strong on the back of firm energy demand, a full quarter contribution from additional gas import from West Natuna and absence of integration costs and purchase price allocations from the acquisition of WSN Environmental Solutions that dented 4Q11 results. Earnings from subsequent quarters may be affected by the planned maintenance shutdown of its S’pore co-generation plant but this will be offset by the additional gas imports and commencement of full operations in Salalah IWPP(Independent Water and Power Plant) by 2H2012.

Investment Actions? We continue to like Sembcorp Industries for its strong pipeline of utilities projects (Salalah IWPP: 2Q12, Jurong Island Co-gen: 4Q13, Andhra Pradesh power plant: 1H14) and expect strong earnings in its utilities business to continue. Maintain Buy with unchanged target price of $6.58.