Brokers' take

Sembcorp Industries | BUY (maintained) Jan 15 close: S$2.65 Target price: S$3.20 UOB Kay Hian Research, Jan 15

SEMBCORP Energy India (SEIL) is expected to report a Q4 2018 plant load factor (PLF) of 51.6 per cent ... Sembcorp Gayatri Power (SGPL) is expected to report a Q4 2018 PLF of 82.6 per cent. Losses for Q4 2018, while expected, could be smaller than the S$24 million losses reported in 3Q18 due to international coal prices having fallen by 6 per cent quarter-on-quarter (q-o-q), IEX spot prices having risen by 20 per cent q-o-q, and PLFs being comparable on a q-o-q basis.

With losses from SGPL potentially lower, core earnings from India could come in slightly above our current estimate for breakeven ... Taking into account that international coal prices remain elevated, SGPL seems unlikely to be able to narrow its losses faster than we currently are expecting. We are thereby taking the opportunity to lower our 2019 and 2020 earnings by about 5-6 per cent. Our target price falls to S$3.20 with our earnings revision ... On a valuation basis, we maintain our "buy" rating.