Keppel has won a USD85m contract to build a liftboat for Crystal Heights Holdings, deliverable in 4Q17.
- Maintain BUY and SGD10.90 TP (33% upside).
- Our industry sources earlier placed the Chinese yards as front-runners for the order, but Keppel’s track record of quality and patented technology has prevailed.
- We recommend picking up this blue-chip world leader at c.9x P/Es, c.5x EV/EBITDAs and 5.9% yield.
High-specification unit.
- Although this liftboat is capable of operating at a water depth of only 60m (vs c.100m for the largest designs), its massive 280-tonne deck crane distinguishes it from other units in this range. It accommodates 200 persons above deck and incorporates Keppel’s patented jacking system, which is proven by an earlier Keppelbuilt unit – Seafox 5 – which completed >100 jacking cycles in a single year, equivalent to what a typical drilling rig does in 20 years.
Liftboat market still going strong.
- This order hints at industry players’ confidence in the liftboat market, whose services in the maintenance and production phase of the offshore platform lifecycle remain in demand.
- We note that Vallianz (VALZ SP, NR) also announced yesterday a longterm liftboat charter contract (5-year firm + 2-year extension option) for two self-elevating platforms from a Middle Eastern national oil company worth up to USD300m in value.
Keppel selected over Chinese yards.
- Our industry sources earlier thought that this liftboat order might go to Chinese yards, given lower construction costs in China.
- We believe Keppel was able to clinch this order given its:
- much higher build quality,
- track record of on-time deliveries, and
- proven jacking system vs higher incidences of jacking failures in China.
Blue-chip world leader at compelling valuations.
- With the privatisation of Keppel Land, Keppel has brought in-house a significant profit centre which should stabilise core earnings at a time when most oil and gas companies are struggling to remain profitable.
- We recommend accumulating this blue-chip global player at c.9x P/Es, c.5x EV/EBITDAs and a highly-attractive 5.9% sustainable yield.
- Maintain BUY with an unchanged SGD10.90 TP.
- Order win momentum remains a key risk.
(Lee Yue Jer, CFA)
Source: http://www.rhbgroup.com/
