Hot stock: Sembcorp climbs as much as 6.8% after H1 profit beats expectations
Vivienne Tay
SHARES of Sembcorp Industries hit a new high on Monday (Aug 7) after the energy player’s net profit for the first half of 2023 beat analyst expectations.
Its counter reached a high of S$5.98 on Monday, up 6.8 per cent or S$0.38 on a cum-dividend basis as at 11.26 am. This exceeded the previous high of S$5.79 recorded on Jun 15, 2023. By 2.20 pm, shares of Sembcorp were up 6.2 per cent or S$0.35 to S$5.95, with 11.4 million shares changing hands.
On Friday, the group reported a 56 per cent rise in H1 net profit to S$608 million, after accounting for the disposal of its Indian coal business. It also recorded S$6 million in one-off gains for the six months ended Jun 30 on a continuing-operations basis.
In separate reports, DBS Group Research and Maybank Singapore raised their target prices on the energy and urban solutions provider, as they expect energy prices to stay elevated with power supply still tight.
OCBC Investment Research also raised its fair value estimate on Sembcorp to S$7.11 from S$6.12, after updating its estimates due to the stronger-than-expected results.
“Overall, the group continues to pivot in the right direction towards renewables, and its ability to deliver higher ROE should support share price performance,” OCBC said.
DBS Group Research on Monday increased its target to S$7.15 from S$6.50, after raising its FY2023 and FY2024 profit forecasts by 26 per cent and 16 per cent, respectively. It noted that H1 profit has made up over 70 per cent of its full-year estimate.
However, it lowered its estimates for Sembcorp’s integrated urban solutions segment. The group had reported a 15 per cent drop in this segment to S$53 million from S$62 million for the previous corresponding period.
Meanwhile, Maybank on Friday raised its target to S$6.30 from S$6.10, after adjusting its FY2023 to FY2025 earnings forecasts higher by 2.7 per cent to 3.1 per cent. It views the recent share price pullback as an opportunity for investors.
“We remain positive on Sembcorp’s growth prospects, with Sembcorp crossing S$10 billion in market capitalisation; the group could potentially be included in the MSCI in August or November 2023,” said Maybank analyst Kelvin Tan.
Echoing the sentiment, OCBC believes the group’s inclusion in the MSCI Singapore Index will be a share-price catalyst.
All three research teams have reiterated “buy” on the stock.
