Keppel Corp - RHB Invest 2017-05-30: Contracts Won Total SGD263m YTD

Keppel Corp - RHB Invest 2017-05-30: Contracts Won Total SGD263m YTD KEPPEL CORPORATION LIMITED BN4.SI

Keppel Corp - Contracts Won Total SGD263m YTD

  • Keppel has won jobs worth c.SGD263m YTD, with contracts for a tension leg wellhead platform, dredging vessels and LNG carrier vessels. 
  • We believe the group would be able to add another SGD500m to its current orderbook of SGD3.7bn this year. 
  • Maintain BUY, with an SOP-based TP of SGD7.55 (17% upside), as we continue to like its mix of income, ie recurring net profit and earnings derived from projects.

Contracts won YTD total c.SGD263m. 

  • Keppel’s offshore & marine (O&M) unit is closing its 1H17 on stable footing. It has won three contracts worth c.SGD263m. 
  • In April, the group announced that it won a tension leg wellhead platform (TLWP) contract awarded by Petrovietnam Technical Services (PTSC) for the Ca Rong Do field development. The contract is worth USD40m.
  • In end-May, Keppel announced two separate contracts for dredgers and liquefied natural gas (LNG) carriers. It was awarded a contract for two dredgers from Jan De Nul Group, which was valued at approximately SGD120m. 
  • Recall that in Jul 2016, it won a contract for three dredgers from the same client. Its other contract is for two LNG carriers from Stolt-Nielsen, worth SGD103m. The contract comes with an option of supplying another three more LNG carriers.

Orderbook is at SGD3.7bn. 

  • We estimate its O&M segment’s orderbook to be worth about SGD3.7m presently. 
  • As a comparison, Keppel secured SGD500m worth of contracts in FY16. We expect it to win about SGD500m in contracts this year.

Recurring income to complement O&M. 

  • Keppel is also focusing on expanding its stable recurring income from its property, infrastructure and investment divisions. These sources of income would complement the earnings that are based on projects in its offshore & marine unit. In FY16, c.40% of its net profit came from a recurring base.

Maintain BUY. 

  • We believe its O&M segment’s numbers are set to grow moving forward, due to the improving outlook of the oil & gas market. Also, it would be a matter of time before development capex starts to trickle in. 
  • While the O&M unit’s outlook is expected to be soft over the near term, we believe that Keppel’s strategy of focusing on non-drilling solutions and specialised vessels is the right way to go, as evidenced by its contract wins YTD.
  • We maintain our BUY recommendation, with a SOP-based TP of SGD7.55 (from SGD7.56) as we update our model for housekeeping purposes. 
  • Downside risks to our call are a lower-than-expected replenishment of orders and a slowdown in its property sales.

Singapore Research RHB Invest | http://www.rhbinvest.com.sg/ 2017-05-30
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 7.550 Down 7.560