Most analysts have continued to be positive on Sembcorp Industries despite the conglomerate’s weak results for FY2020 ended Dec 31.
This is due mainly to the company’s increasing focus on sustainability and renewable energy businesses.
CGS-CIMB Research has maintained its “add” rating for the stock with a higher target price of $1.97 from $1.95 previously.
The brokerage notes that a “key catalyst” will come from the company’s aim to rebalance the current renewable/thermal mix of 40/60 profit contribution in the medium term.
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“Sembcorp is a classic stock for ESG investment in the longer term given the proper communication of its renewable energy plans,” CGS-CIMB head of research Lim Siew Khee writes in a note dated Feb 24.
DBS Group Research, too, has a “buy” rating for Sembcorp.
The brokerage has reinstated coverage on the company with a higher target price of $1.85 from $1.70 previously.
It points out that Sembcorp may have further upside from post-Covid-19 demand recovery, removal of equity raising overhang and growing demand for renewable energy.
“We remain positive on Sembcorp’s longer-term prospects and see renewable energy as a key growth engine to drive a valuation re-rating post demerger of Sembcorp Marine,” DBS analyst Ho Pei Hwa writes in a Feb 24 report.
However, Phillip Securities has downgraded the stock to “accumulate” rating from “buy”, albeit with a higher target price of $1.77 from $1.75 previously.
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The downgrade, the brokerage says, was mainly because most of the positive development at Sembcorp have been priced in.
It notes that the recent share-price rally has raised Sembcorp’s book value to 0.6 times its FY2021 earnings forecast.
“This reflects its improving outlook and stronger operating metrics expected for FY2021,” Phillip senior research analyst Terence Chua writes in a Feb 25 note.
As at 2.20 pm, Sembcorp was up 10 cents or 6% at $1.76 with 8.4 million shares changed hands.
