Keppel Corp - OCBC Investment 2017-07-05: Well-placed In The Gas Market

Keppel Corp - OCBC Investment 2017-07-05: Well-placed In The Gas Market KEPPEL CORPORATION LIMITED BN4.SI

Keppel Corp - Well-placed In The Gas Market

  • To deliver world’s first converted FLNG.
  • Much more than a shipyard.
  • Monitoring China.

World’s first converted FLNG vessel to be delivered around Aug 

  • Keppel Corporation (KEP) recently held a naming ceremony for Hilli Episeyo, the world’s first converted FLNG vessel. 
  • Recall that KEP had entered into a US$735m contract in 2014 with Golar LNG to convert an existing Moss LNG carrier into the FLNG, and this is the first in a series of FLNG vessels – there will be the Golar Hilli, Golar Gandria, Golar Gimi for now; the conversion contract values for Gandria and Gimi are U$684m and US$705m, respectively.
  • Compared to newbuilds, converted FLNGs are significantly more cost-effective and faster to market, without compromising safety and processing capabilities.

Going beyond the role of a traditional shipyard 

  • KEP is able to go beyond the role of a traditional yard by bringing in key strategic players, financial investors and participate in the vessel design early on, amongst other factors.
  • According to management, it is also able to offer solutions for the seamless delivery of LNG from end to end, from upstream (FPSO, FLNG), to midstream (FSRU, small-scale LNG carriers), and finally downstream (LNG bunker vessel, land-based and floating power plants, dual-fuel vessels). As such, KEP sees itself as an industry enabler for a yet-to-mature sector, not just a pure product/service provider.

China also making a strategic push into FLNG 

  • According to Reuters, China plans to pour almost US$7b into FLNG projects in Africa, aiming to become the lowest cost seller of the complex floating plants. It has lent or committed almost US$4b to three FLNG schemes off the African coast (Coral, Fortuna-Gandria, Cameroon-Hilli). 
  • In two more African projects costing US$3b, it plans not only to provide the funding, but also build the production platforms.
  • KEP has a head-start in this complex solution versus its competitors, and is able to go beyond the role of a traditional yard, as mentioned earlier. 
  • Maintain BUY with S$7.36 Fair Value on Keppel Corp.

Low Pei Han CFA OCBC Investment | http://www.ocbcresearch.com/ 2017-07-05
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 7.360 Same 7.360