Keppel Corp - Maybank Kim Eng 2015-10-23: Support from 6% yield

Keppel Corp - Maybank Kim Eng 2015-10-23: Support from 6% yield KEPPEL CORPORATION LIMITED BN4.SI 

Keppel Corp - Support from 6% yield 

  • 3Q15 met expectations. Weaker O&M performance offset by stronger property contribution. We marginally cut EPS 1-2%. 
  • Infrastructure unlikely to be burdened by any more losses as EPC projects are complete. 
  • Maintain HOLD, but slightly trim SOTP TP to SGD7.70 from SGD7.80. Stock price is supported by 6% dividend yield. 

What’s New 

  • 3Q15 PATMI of SGD362.9m (-12.4% YoY, -8.5% QoQ) met expectations. 
  • 9M15 PATMI of SGD1,120m (-3.4% YoY) formed 76% of both our and consensus’ FY15E. 3Q15 O&M operating margin of 12.2% was stable (2Q15: 13.0%, 3Q14: 12.2%), but revenue was down 11% QoQ. 
  • Property’s strong sales momentum carried over, with about 1,330 home sold in 3Q15 compared to about 600 a year ago, largely from China. 
  • Losses in EPC projects seem to be nearly over as it handed over the Greater Manchester plants and will complete the Doha project by this year-end. 

What’s Our View 

  • Keppel has secured SGD1.7b of orders YTD and its net orderbook now stands at SGD10b. 
  • The outlook for new rig orders remains weak as offshore drillers continue to battle with rig oversupply. 
  • Sete Brasil’s financing issue remains unresolved even though Keppel does not see any need for provisions. We are concerned over potential write-downs if this continues. 
  • Deliveries for three jackups (2 for Grupo R, 1 for Parden Holdings) were pushed back 3- 4 months, but Keppel was compensated with additional fees. 
  • The company is optimistic on the property segment in China, citing loosening measures, which should allow it to benefit given its sizable exposure in China. We keep a cautious view as we think that demand is patchy. 
  • We have made marginal 1-2% cuts to our FY15-17E forecasts. 
  • SOTP TP trimmed to SGD7.70 from SGD7.80. Conglomerate structure should help it weather the downturn better than SMM. Stock also supported by sustainable 6% dividend yield. 
  • Maintain HOLD.

Yeak Chee Keong CFA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2015-10-23
Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 0.77 Down 0.78