Utilities turnover dropped by 38% to S$696m, mainly due to lower fuel prices, which are a pass-through item. Utilities PATMI fell by 16%. The UK business was down 73% with the expiry of a contract on more favourable terms, and the depreciation of the GBP. Singapore utilities earnings grew 13%, with a tax writeback of S$5.7m and a one-off fuel sale offsetting a provision made for upcoming unscheduled maintenance.
With regards to its bid for the US$1bn Salalah independent water & power project (IWPP) project in Oman, management said that it is still in the process of locking down financing. With tighter credit markets, it now has to rope in more banks as individual banks have overall reduced their allocation in order to reduce its risk exposure. However, SCI still seemed optimistic on securing the project.
We are leaving our FY09 forecasts unchanged, where we expect SCI to post 9.8% growth to S$557.0m. We are forecasting steady earnings CAGR of 9% p.a. over the next three years, with earnings expected to decelerate in FY11 due to the marine business. Utilities are expected to perform in line with muted GDP growth, while we are not factoring any significant project wins at this point.
We are adjusting our SOTP price target upwards from $2.70 to $3.03, in line with SMM and Gallant Ventures’ price rises. However, we are reducing our recommendation to a Hold, as SCI’s share price is currently in line with this. We do not expect any significant near term catalysts, with a potential win at Salalah possibly to come at the expense of margins.
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