Despite Sembcorp Industries’ positive 1HFY2021 results ended June 30, Phillip Securities has slashed its FY2021 earnings forecast the energy company by 34%.
The lower forecast, the brokerage says, accounts for the 1HFY2021 impairments of $212 million and lower conventional energy earnings in 2HFY2021 ended Dec 31.
See also: Analysts keep optimism on Sembcorp after positive 1H results
The brokerage has also lowered its target price for Sembcorp to $2.01 from $2.07 previously and maintained its “neutral” rating for the stock.
Phillip warns that Sembcorp’s longer-term outlook remains challenging.
The company, it says, faces persistent uncertainties surrounding the recovery from Covid-19, intense competition from other global utility companies and the expiry of long-term contracts.
In particular, the expiry of long-term contracts is expected to affect Sembcorp’s earnings by around $100 million in the next five years.
Phillip says the impact on the company’s earnings is expected in Singapore as the local natural gas contracts approach expiry in 2028.
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The Phu My 3 power plant in Vietnam also faces reducing tariffs as its power purchase agreement approaches expiry in 2024, it adds.
As at 11.29 am, Sembcorp was down 1 cent or 0.5% at $1.95 with 2.2 million shares changed hands.
