Although Sembcorp Industries continues to be rated an “add” by CGS-CIMB Research, the brokerage has lowered its target price for the company to $1.95 from $2.27 previously.

This is based on the CGS-CIMB’s CY21 forecast of one time book value, in line with the expected improvement in return on equity (ROE).

The brokerage also revised its FY20-22 core earnings per share forecasts by -2 to 9%, mainly to reflect the demerger of Sembcorp Marine (Sembmarine), which has ceased to be a subsidiary.

CGS-CIMB says Sembmarine’s departure could raise Sembcorp’s net gearing to 1.97 times in FY2020, owing to a lower equity base.

But Sembcorp’s ROE should improve to around 11.8%, compared to 5% in the past six years, it says.

“We believe that as the dust settles in FY21, efforts could be stepped up in capital recycling to unlock value and improve ROE,” CGS-CIMB head of research Lim Siew Khee writes in a note dated Sept 18.

As at 1.02 pm, Sembcorp was up 2 cents or 1.5% at $1.33 with 4.6 million shares changed hands.