Keppel Corp - OCBC Investment 2017-07-05: Well-placed In The Gas Market

KEPPEL CORPORATION LIMITED BN4.SI

Keppel Corp - Well-placed In The Gas Market

Keppel Corporation (KEP) recently held a naming ceremony for Hilli Episeyo, the world’s first converted FLNG vessel.
Recall that KEP had entered into a US$735m contract in 2014 with Golar LNG to convert an existing Moss LNG carrier into the FLNG, and this is the first in a series of FLNG vessels – there will be the Golar Hilli, Golar Gandria, Golar Gimi for now; the conversion contract values for Gandria and Gimi are U$684m and US$705m, respectively.
Compared to newbuilds, converted FLNGs are significantly more cost-effective and faster to market, without compromising safety and processing capabilities.

KEP is able to go beyond the role of a traditional yard by bringing in key strategic players, financial investors and participate in the vessel design early on, amongst other factors.
According to management, it is also able to offer solutions for the seamless delivery of LNG from end to end, from upstream (FPSO, FLNG), to midstream (FSRU, small-scale LNG carriers), and finally downstream (LNG bunker vessel, land-based and floating power plants, dual-fuel vessels). As such, KEP sees itself as an industry enabler for a yet-to-mature sector, not just a pure product/service provider.

According to Reuters, China plans to pour almost US$7b into FLNG projects in Africa, aiming to become the lowest cost seller of the complex floating plants. It has lent or committed almost US$4b to three FLNG schemes off the African coast (Coral, Fortuna-Gandria, Cameroon-Hilli).
In two more African projects costing US$3b, it plans not only to provide the funding, but also build the production platforms.
KEP has a head-start in this complex solution versus its competitors, and is able to go beyond the role of a traditional yard, as mentioned earlier.
Maintain BUY with S$7.36 Fair Value on Keppel Corp.

Low Pei Han CFA OCBC Investment | http://www.ocbcresearch.com/ 2017-07-05

OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 7.360 Same 7.360