Keppel Corp - RHB Invest 2016-10-21: Growth Hinges On Property And Infrastructure

Keppel Corp - RHB Invest 2016-10-21: Growth Hinges On Property And Infrastructure KEPPEL CORPORATION LIMITED BN4.SI

Keppel Corp - Growth Hinges On Property And Infrastructure

  • We expect Keppel’s property and infrastructure arms to continue providing support to earnings, moving forward. At the current price, the group is being valued on its property, infrastructure and investment segments. 
  • 9M16 core net profit of SGD643m was below our and consensus expectations. 
  • Its O&M orderbook (ex-Sete Brasil) stands at SGD4.1bn. 
  • Maintain BUY with SOP-based TP of SGD6.52 (from SGD6.90, 20% upside), as we roll forward our valuation to FY17.


  • Keppel's offshore & marine segment (O&M) – its main growth driver for the past five years – is hurting from the low crude oil price environment. 
  • We expect its property and infrastructure units to pick up after O&M and register resilient and stable earnings growth, moving forward.

O&M hunkers down. 

  • YTD, the O&M unit has won c.SGD500m in new jobs. Its orderbook is now at SGD4.1bn, excluding semi-submersibles (semi-subs) for Sete Brasil. 
  • Floating vessel solutions make up 63% of its orderbook, followed by jack-up rigs, semi-subs and specialised vessels. The O&M unit is expected to deliver four more projects in 4Q16. 
  • On Sete Brasil, Keppel is monitoring the developments closely and will continue to work with authorities. Its SGD230m provision for Sete Brasil, taken in 4Q15, is deemed adequate, at this juncture.

Infrastructure & property. 

  • Under its residential property arm, Keppel has 16,327 units to be launched in 4Q16-2018, while its commercial arm has 1.1m sqm of GFA that is under development. 
  • It also recently announced an SGD36m contract to provide technology and services to a waste-to-energy plant in Shenzhen, China, which is expected to be completed by FY18.


  • At its current share price, the market is valuing Keppel without its O&M division. 
  • Its infrastructure, property and investments units are still performing well. 
  • BUY, with new SOP-based TP of SGD6.52 as we adjust our valuation slightly to reflect FY17F estimates. 
  • A key risk is the deferral of rigs for O&M.

Singapore Research RHB Invest | 2016-10-21
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 6.52 Down 8.800