Sembcorp shares fall to four-month low after Citi cuts profit forecasts
[SINGAPORE] Shares of Sembcorp Industries fell 3.9 per cent to a four-month low of S$5.95 in early trade on Friday (Jul 3) after Citi slashed its profit forecasts for the counter.
In a report on Thursday evening, Citi analyst Luis Hilado cut the brokerage’s recurring profit forecast for Sembcorp for the next three years by 6 to 11 per cent. He also lowered Sembcorp’s reported profit forecast over the same period by 10 to 14 per cent, citing weaker prospects across several business segments.
Sembcorp’s earnings for the first half of the year, which will be announced in August, are also expected to fall 26 per cent short of Bloomberg consensus estimates, he said.
The analyst also placed the stock on a 30-day negative watch, noting that upcoming developments could weigh on the share price.
These developments include more expensive gas, poor weather reducing the amount of power generated by its wind farms and an unfavourable exchange rate between the Indian rupee and the Singapore dollar.
Hilado added that the extra, one-time costs tied to Sembcorp’s recent purchase of Alinta Energy has not been fully accounted for yet by other brokerages as well.
Despite these immediate hurdles, Citi still recommended buying the stock. By next year, Alinta is expected to start generating significant profits and drive a strong financial recovery, said the note.
