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.

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.

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