These 2 Sembcorp Industries segments have fantastic growth potential

Marine and urban development arms look promising.

According to OCBC Investment Research, these two sectors are especially well-positioned for growth. The marine segment can capitalise on the rising demand from the offshore oil and gas industry while the urban development segment has a bright outlook expanding in emerging markets.

Here's more from OCBC:

Major industrial group with deep roots. Sembcorp Industries (SCI) is a major industrial group primarily involved in the businesses of 1) utilities, 2) marine and 3) urban development. A merger of Sembawang Corp and Singapore Technologies Industrial Corp (STIC) in 1998 resulted in the formation of SCI, which was a behemoth then, with businesses spanning a wide range of industries. SCI is now a more focused group today after a streamlining of its businesses.

Growth potential coupled with relatively stable earnings. The nature of SCI’s utilities business is relatively stable, as the demand for utilities generally does not vary significantly over a short period of time. At the same time, growth is driven by asset acquisition and construction, so there is growth potential, provided that good investment decisions are made. SCI’s marine arm is also wellpositioned to capitalise on demand from the offshore oil and gas industry, given its market -leading position. Finally, SCI’s urban development segment, though small in comparison to the utilities and marine arms, possesses growth potential with its focus on emerging markets.

Under-priced; initiate with BUY. SCI has had a good track record in its three main business segments, inspiring confidence in the business and investment community. The long-term outlook for its businesses also looks bright, though the Singapore utilities business may, in the short term, be impacted by an expected increase in competition. The group has been consistent in paying out dividends of at least S$0.15/share each year since 2009, implying a minimum dividend yield of 3.1% at current prices. Initiate with BUY and S$6.48 (based on sum-of-parts method) fair value estimate.