Keppel Corp - RHB Invest 2017-01-03: Infrastructure And Utilities To Provide Resilience

Keppel Corp - RHB Invest 2017-01-03: Infrastructure And Utilities To Provide Resilience KEPPEL CORPORATION LIMITED BN4.SI

Keppel Corp - Infrastructure And Utilities To Provide Resilience

  • Keppel’s O&M orderbook (ex-Sete Brasil) stands at SGD4.1bn. We believe its property and infrastructure arms would continue to provide earnings support. 
  • At its current share price levels, Keppel is being valued on its property, infrastructure and investment segments. 
  • Also, its 63% orderbook exposure to floaters, which are production assets, should engender a lower risk of contract cancellations. 
  • Maintain BUY, with a SOP-based TP of SGD6.52.



Offshore & marine (O&M) unit is hunkering down. 

  • As of late 2016, Keppel’s O&M division has added new contracts of c.SGD500m. Its orderbook stood at SGD4.1bn, excluding semisubmersibles (semisubs) for Sete Brasil. 
  • Its floating vessel solutions accounted for 63% of its orderbook, followed by jack-up rigs, semis and specialised vessels. O&M is expected to deliver four more projects in 4Q16. 
  • On Sete Brasil, Keppel is monitoring the developments closely and will continue to work with the authorities. The SGD230m provision for Sete Brasil taken in 4Q15 is deemed adequate, at this juncture.


Deliveries on the way. 

  • Keppel has secured c.SGD500m worth of contracts YTD for four FPSO projects, a pipe lay vessel upgrade, three dredgers and two dual fuel tugs. 
  • In 4Q16, it expects to deliver four more projects, one jack-up rig for Falcon Energy, one semisub for SOCAR, and two FPSO conversions for Bumi Armada (BAB MK, NEUTRAL, TP: MYR0.62) and Yinson (YNS MK, BUY, TP: MYR3.88). 
  • Keppel has SGD5.3bn worth of contracts to be delivered in FY17, SGD577m in FY18, and SGD4.2bn in FY19-21.


Infrastructure & property. 

  • Under its residential property arm, Keppel has 16,327 units to be launched from 4Q16 to 2018, while its commercial arm has 1.1m sqm of gross floor area (GFA) under development. 
  • Keppel recently announced a SGD36m contract to provide technology and services to a waste-to-energy plant in Shenzhen, China. It is expected to be completed by FY18. 
  • In 9M16, Keppel sold 2,759 housing units in China for CNY4.6bn while 260 units sold in Vietnam brought in USD70.8m. Its remaining residential units in Singapore stand at 912 units. 
  • Meanwhile, in China, the company has 35,200 remaining residential units to be sold. Its developments in Vietnam, Indonesia, India and US have a total of 32,331 accumulated remaining residential units to be sold.


Maintain BUY. 

  • At its current share price levels, the market is valuing Keppel without its O&M segment. Its infrastructure, property and investments segments are still performing well. 
  • Maintain BUY, with a SOP-based TP of SGD6.52. 
  • A key risk to our call is the deferral of rigs affecting its O&M business.




Singapore Research RHB Invest | http://www.rhbinvest.com.sg/ 2017-01-03
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 6.520 Same 6.520



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