Keppel Corporation - OCBC Investment 2015-10-23: Supported by property

KKeppel Corporation - OCBC Investment 2015-10-23: Supported by property KEPPEL CORPORATION LIMITED BN4.SI 

Keppel Corporation: Supported by property 

 More jack-ups deferred 
 Offshore earnings momentum to turn 
 Net order book S$10.0b 


3Q15 results weighed by O&M 

  • Keppel Corporation reported a 23.4% YoY drop in revenue to S$2.4 and a 12.4% fall in net profit to S$362.9m in 3Q15, such that 9M15 net profit accounted for 72% of our full year estimate. 
  • Operating margin for the O&M division was lower at 12.3% in the quarter compared to 14.9% a year ago, and a deliberate slowdown in the construction of rigs in Brazil as well as deferment of other rigs impacted the O&M segment. 
  • However the property division saw higher revenue, mainly due to better performance in China and Vietnam, partly offset by lower revenue from Singapore. 
  • There were no significant one-off items in 3Q15. 

Three more jack-ups deferred 

  • In 3Q15, Keppel acceded to requests for slightly later delivery of three jackups (two for Grupo R and the other for Parden Holdings) from 2015 to early next year; the delay is about three to four months for the rigs and some compensation has been obtained. This is not a surprise given the current challenging environment, and follows on from the eight rigs that have been deferred earlier this year (three from Fecon and five from Transocean). 

Rig construction in Brazil slowed down 

  • Recall that the percentage of completion for the first three units of the six semi-submersible units for Sete Brasil, were 90%, 63% and 36% respectively in the last quarter. Construction has slowed down and we think current levels of completion should just be slightly higher compared to a quarter ago. 

Maintain HOLD 

  • To date, new order wins totaled about S$1.7b (vs our full year forecast of S$2b), such that the group's net order book stands at S$10.0b with deliveries extending into 2020. Meanwhile, management still expects its yards to remain busy in 2016. 
  • Rolling forward our valuations to FY16 earnings and updating other inputs in our sum-of-parts valuation, our fair value estimate rises slightly from S$6.95 to S$6.96. 
  • Maintain HOLD.


 
Low Pei Han OCBC Securities | http://www.ocbcresearch.com/ 2015-10-23
OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 6.96 Up 6.95


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