Keppel Corp - RHB Invest 2017-01-27: Eyes On The Horizon

Keppel Corp - RHB Invest 2017-01-27: Eyes On The Horizon KEPPEL CORPORATION LIMITED BN4.SI

Keppel Corp - Eyes On The Horizon

  • In the near term, we expect property and infrastructure to drive Keppel’s earnings. 
  • For offshore & marine, we believe its strategy of focusing on non-drilling solutions, LNG projects and specialised vessels would enable it to navigate the choppy waters of the currently weak market conditions. 
  • We adjust our SOP valuation to better reflect its listed entities and increase our TP to SGD7.39 (from SGD6.52, 18% upside), which implies 10x FY17 P/E. 
  • Maintain BUY, as we raise our earnings for FY17F-18F by 8- 9% respectively after adjusting our O&M orderbook replenishment higher.



Keppel Corp (Keppel) has a SGD3.7bn orderbook

  • Keppel Corp (Keppel) has a SGD3.7bn orderbook, and the current focus of its offshore & marine division would be on LNG- and gas-related technologies, specialised vessels, repurposing offshore technology, and repairs and conversions. This is as the group attempts to harbour through the long and harsh winter. 
  • Do note that Keppel secured SGD500m worth of contracts in FY16, all coming from non-drilling solutions. These contracts are for four FPSOs, a pipelay vessel upgrade, three dredgers and two dual fuel tugs, which are to be delivered in various stages in FY17-18.


Property and infrastructure to pick up the slack. 

  • We believe that Keppel’s property and infrastructure wings are to play an important role in driving its earnings in the near to medium term. 
  • For property, the group is to continue focusing on Singapore, China and Vietnam as its key markets. 
  • Keppel was recently awarded the tender to design, build, own and operate Singapore’s fourth desalination plant with a concession period of 25 years. The plant would be able to treat sea water as well as fresh water from the Marina reservoir.


Maintain BUY with a SGD7.39 TP (from SGD6.52). 

  • Although the offshore & marine market is currently soft, we believe Keppel’s strategy of focusing on non-drilling solutions and specialised vessels would enable it to navigate the tough market situations. 
  • Maintain BUY with a higher SGD7.39 TP, which implies 10x FY17 P/E. 
  • Risks to our forecast includes lower-than-expected orderbook wins for the offshore & marine business.




Singapore Research RHB Invest | http://www.rhbinvest.com.sg/ 2017-01-27
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 7.39 Up 6.520



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