Daiwa upgraded Sembcorp Industries to Outperform from Hold, saying the valuation of the utilities business is undemanding amid a potential earnings recovery.
“We believe Sembcorp Industries’ (SCI) utilities business is on the cusp of a strong earnings recovery, led by its India unit, which is seeking
an IPO listing on the National Stock Exchange of India,” it said in a note last week.
It estimated the utilities business is trading at a “depressed” 2018 price-to-book ratio of 0.61 times, compared with regional utilities peers at 0.8-3.5 times. Daiwa tipped a re-rating of SCI’s utilities segment in the next six to 12 months.
It pointed to two key developments: brighter prospects for the India business as it appeared set to turn profitable this year after three years of losses and a stabilization in the Singapore utilities operations after the recent increase in electricity prices.
Daiwa raised its target price on the stock to S$3.42 from S$3.36.
The stock ended Friday up 0.32 percent at S$3.10.