1Q09 results — Forex gain of S$18m (vs. S$7m loss in 1Q08) and S$8.7m tax writeback of provision for deferred tax helped boost 1Q09 profit to S$134m (9% yoy), accounting for 29% of our full-year profit estimate. During the quarter, O&M was the key profit driver (55% of PATMI vs. 45% in 1Q08) while Utilities was largely in-line (after adjusting for one-off items), with weaker performance from UK with beneficial feedstock pricing contract expired since 1Q08.
Utilities — Total Utilities PATMI reached S$51mn (-16% yoy) on back of S$696m revenue (-38% yoy; due to lower HFSO prices). Sale of fuel amounting to $5m and tax writeback of $5.7m boosted Singapore Utilities PATMI by 13% to $32m and helped partially offset weakness from UK ($9m, -73% yoy). Both China and Vietnam operations are progressing well and current profitability levels should see sustained improvements as more greenfield projects kick in.
Enviro/Parks — Lower operational costs for Enviro biz helped boost profit by 79% to $1.5m despite lower revenue (-10% yoy). Industrial Park reported $4m (-40% yoy) profit due to lower land sales from Vietnam Park and lower share of results from Gallant Venture; Chinese Parks performance remains unchanged yoy. Both segments are not expected to have material impact for 2009-10 since we forecast marginal EPS contribution from Enviro/Parks.
Hold ---- SCI’s strong balance sheet (both at group and divisional level) should enable the group to weather the economic and financial crisis. After the recent sharp rally, Utilities is now trading at 9x 10E P/E (vs 12.7x for industry). The stock will likely trade range-bound given limited catalysts in the near term.
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