net profit of S$320m accounted for 49% of our net profit forecast. 2Q10 net profit
growth was driven by its offshore marine unit (+26% YoY), utilities unit (+8%
YoY) and environmental unit (+71% YoY) while the industrial park unit reported
slight decline (-3% YoY). Overall earnings remain solid, and we maintain BUY on
the stock with an unchanged SOTP-derived TP of S$4.96. Valuation remains
attractive and we expect stock to re-rate on incremental utilities earnings growth.
Marine: Strong performance but orderbook depleting. 2Q10 Marine net profit
jumped +26% YoY despite lower revenue (-27% YoY) on higher margins. Marine
unit accounted for 61% of 2Q10 net profit. Outstanding orderbook as at 3 Aug 10
slipped to S$4.3b vs. S$7.9b last year. We believe earnings decline is inevitable
in FY11 as order outlook (ex-Petrobras) remains clouded by uncertainties.
New projects and expansions in the pipeline that will drive growth
- US$208m acquisition of Cascal. Takeover nearly completed. Major cost of acquisition
acquisition to be earnings accretive in FY11. Cascal reported US$23.5m net profit for
the in their latest financial year ending Mar 2010.
- 60% owned US$1b Salalah independent water and power plant (IWPP) in Oman is
(O&M) will be carried out by a 70% owned subsidiary.
- US$200m expansion of desalination capacity in Fujairah. This will increase capacity
agreement (WPA) by Apr 2011.
- 1,320MW power plant in India. SCI signed a deal to acquire 49% equity stake in a
S$2.1b and the plant is expected to be ready for operations by end-2013. Operations
and maintenance (O&M) will be carried out by a 70% owned subsidiary.
Source: UBS
