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zhuge_liang,
The sale of Cosco shares is by SembMar (SML)...not SembCorp Ind (SCI).
It is selling up to US$38.5 million worth of shares in Cosco Corp. at a discount of 2-5.9% ($1.92 to $2.00) below their Wednesday closing price, according to a term sheet. The deal is handled by JPMorgan .
Utilities will be the strongest growth driver for SCI. With the Fujairah project commencing from 27 Sep, 4Q will see the full impact of it revenues - however, the profit contributions from this project is still not too clear.
Marine division will also see the expanded capacity from the acquisition of SMOE & Sembeth yard completed on 25 Aug having its impact on 4Q.
4Q will also account for the $155m tax relief - works out to be about 8.7cts per share.
My take is there will probably be a generous final divident.
Excluding discontinued businesses (SembLog and E&C disposals), net profit would have climbed 28.8% yoy. Revenue from the ongoing operations rose 13.6%, reflecting the stronger margins in the core marine and utilities businesses.
Utilities' YTD net earnings contribution grew by 52% to $159.4m, backed by strong performance from its UK operations and positive contributions from Offshore Engineering. Marine's YTD net profit rose 47% to $82.6m, driven mainly by strong growth in the rig building and ship repair sectors. The only blight was Enviro's YTD net loss of $18.4m, due to an impairment provision taken on certain municipal waste contracts. Clearly, Enviro is still in the midst of management's attempts to turn the division around.
In July, SCI announced that it had confirmed with the tax authorities that it was entitled to losses available for transfer within the group arising from the Solitaire settlement. SCI estimates that the tax benefit of these Solitaire expenses amounts to $155m. Management has confirmed that this tax benefit will be recognised in 4Q06. Loads of cash on hand Even after SCI's capital distribution of $0.15/share in August, KE estimate that SCI will still have close to $1b in cash (around $260m net of straight debt). KE therefore believe that there is the strong likelihood of SCI issuing a special dividend to shareholders in order to optimise its capital structure, as it had done in the past. KE estimate that SCI could pay out a total of $0.12/share, up from the final dividend of $0.065/share paid in FY05. This, combined with the earlier capital reduction, would give shareholders a return of some 8% for the year.
KE are raising their headline net profit forecast by 22% to $895.1m to account for the tax benefit. On a core earnings basis, their forecast remains unchanged at $345.1m, net of exceptionals. This still represents strong 24% yoy growth from 2005. KE also expect 16% core net earnings growth in FY07, and have raised their target price for SCI to $4.20 from $3.90 previously, based on several factors to its sum-of-the-parts valuation. Firstly, its 26.8% stake in Gallant Venture has risen by 80% since its IPO in April. Secondly, SCI is likely to have more cash at year end than we had previously forecast. And finally, KE are ascribing a higher valuation to the Utilities and Marine business based on FY2007's outlook and beyond.
Phillip Securities has raised its fair value to $3.52 from $3.26 after factoring-in higher earnings by the industrial conglomerate's units SembCorp Utilities and SembCorp Marine.
"SembCorp Utilities third-quarter profit after tax and minority interests almost doubled year-on-year to $66.6 mln, particularly due to [the] stellar performance [of] its UK operations," Phillip Securities said in a note to clients.
The research house said SembCorp Marine's profit after tax and minority interests (PATMI) for the first nine months of this year had already surpassed what it made in the whole of last year, and that the company looked set to achieve Philip's estimate of PATMI for all of this year of 200 mln.
Phillip also believes that SembCorp Marine is on track to fulfill the research house's prediction that it will get $1.5 bln worth of orders to be delivered by 2009.
UBS says it has increased its target price to $4.08 from $4.02 after raising slightly its estimates of earnings for the industrial conglomerate for this year and next.
UBS said it had raised its forecast of net profit for this year by 1% to $361 mln and for next year by 4% to $422 mln. UBS said higher profit from utilities would offset lower profit in the company's environmental engineering segment.
UBS analyst Cheryl Lee said that the company's utilities segment had beaten expectations significantly in the third quarter, its net profit having risen 39% qoq.
"We think utilities earnings could surprise," Lee said. She said
SembCorp Industries could get tax benefits of $155 mln arising from the settlement by arbitration of the dispute between unit Sembawang Corp and Switzerland's Allseas over the conversion of the vessel Solitaire.
"This is above our estimate of $140 mln and would be recognized as an exceptional item in the fourth quarter. The benefit would be transferred to subsidiaries eligible for group tax relief and used to offset profits," she said.
3Q results out on Monday 6 Nov.
Lets see how SC Utilities performs. However, the Faijurah project will not have any impact yet as it only comes onstream in 4Q.
Stochastic Oscillator pointing to a start of a price reversal downwards.
Think it is dragged down by SCM's price fall.
Anyone can offer reasons for the drop in price today?
Sembcorp's previous upward wave (looks like it is 3rd wave although Share Junction Chart did not show earlier waves) went from $2.72 to 3.62, an increase of 90c. So the 5th wave may increase by 1.618x90c=$1.51. Bottom of 4th wave was $2.77. So top of 5th wave may reach 2.77+1.51=$4.28.
It is looking to bid for another water and power-related project in the UAE after recently securing a 40% stake in the Fujairah I Independent Water and Power Project (IWPP) for US$1.73b, the Business Times newspaper reported, citing unnamed sources.
Sources told the paper that SembCorp plans to bid for the Fujairah II IWPP, which will entail about $4.75b in investment. Prequalification bids for the project are expected to be submitted later this month.
"It makes sense for SembCorp which already has an operations and management team on the ground there for its project...The Fujairah II project will be just next door," the newspaper quoted a source as saying.
It was higher after UBS described the stock as its top pick among conglomerates here because the company's earnings are backed by its marine division's big order book, dealers said.
"We like SembCorp Industries, for which earnings are backed by a $7b order book at SembCorp Marine and by utilities (about 50% of earnings), offering a mix of mature assets with steady cash flows and growth assets in strategic locations," UBS said its October Singapore Analyser report.
UBS has a target price of $4.02 for SembCorp.
hee..loaded a few lots at 3.14...hee...
wah...really? then better start shorting this counter...hee....
May reach $3.93 at the end of the year.
hee...this counter seems interesting now..any comments? wow..14cts drop today..wondering why???
rogue_trader,
as at 30 June 2006, there were approx 41.4 million unexercised options. This constitues about 2.35% of issued shares.........not that significant......
rogue_trader,
When to exit SCI???? Ahhhh!!! that is a good question.....which I don't have an answer. At HY, SCI reported continued ops profit of 9.51cts. NTA of $1.44 ($1.29 after cap red of 15cts). My forward eps estimate for FY 2006 is about 20 to 22cts (continued opn). At current price of $3.44, P/E is 15.6x (using eps of 22cts).At $4.00, P/E is 18.2x..
At current price, i.e. $3.44, my opinion is it seems to be quite fully valued but the upside is for increased contribution from Marine (additional capacity from the Bethleham and Engineers yard and some productivity gains) and Utilities (the Farjairah plant should should start to contribute). However, not much is known about the impact the latter will have on its topline revenue, financing costs and bottomline contributions......
rogue_trader,
tax on options - think the procedure is like this. Say, option is for 10,000 shares @ $1.00 per share. Option is exercised when share price is $3.00. Therefore, it will be deemed that that the employee 'earned' $2.00 x 10,000 = $20,000 from this option. This $20K will be added onto the employee's earned income in the company and taxed at the appropriate rate at the next tax financial year. The company will report this $20K in the employee's IR8A. Your friend can always check with the accounts/finance/HR dept about this.