DBS Group Research analyst Ho Pei Hwa has maintained a ‘buy’ rating on Sembcorp Industries (Sembcorp) with an increased target price to $3 from $2.40, based on a higher price-to-book value (P/BV) multiple of 1.4 times (from 1.2 times previously). The higher target price is also based on a rolled over valuation to FY2022 (from blended FY2021/2022), against 9-10% normalised return on equity (ROE).
“Successful execution of [Sembcorp’s] renewable energy plan, translating into earnings growth, would further lift valuations, writes Ho in his Feb 15 report.
In May 2021, Sembcorp unveiled its strategy to transform its portfolio from brown to green, by focusing on growing renewables and integrated urban solutions businesses. It set quantitative targets to quadruple its renewable portfolio to 10GW by 2025, from 2.6GW of wind and solar capacity in Southeast Asia, India, and China as of end-2020, according to Ho.