2 bits of good news that are likely to come from Sembcorp's IPO in Oman

It could gain around $105m.

According to CIMB, SCI’s JV in Oman, Sembcorp Salalah Independent Power & Water Company (Sembcorp Salalah), which owns and operates the Salalah Independent Power and Water Plant (Salalah IWPP), will be launching an IPO on the Muscat Securities Market on 28 Aug.

Sembcorp Salalah will be offering 33.410m existing ordinary shares, or 35% of its issued capital of 95.597m shares. The shares will be priced at OMR1.59 (about S$5.17) per share.

Here's more from CIMB:

Simultaneously, SCI announced perpetual securities of S$200m at 5% coupon rate, paid semi-annually. The net proceeds will be used to refinance existing MTNs that are due for renewal in 2014 and to finance general working capital requirements.

We see two positive outcomes from the Salalah IPO – extraordinary gain and valuation lift. We estimate SCI to recognise a gain of about S$105m,comprising a S$35m gain from the disposal of the 20% stake and S$70m fair-value gain between the carrying cost and the post-listing market value.

We do not expect a further dilution of its stake and believe SCI will hold on to its 40% given that Salalah is a core asset in the Utilities business.

At S$5.17, we calculate that the IPO ispriced at about 16x FY13 P/E, based on an estimated EPS of S$0.31 (Salalah’s annualised net profit of S$30m at 100%). This could re-rate SCI’s Utilities stub valuation of about 7x FY13 P/E.

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