Keppel Corporation - OCBC Investment 2018-07-20: A Gift On Its 50th Birthday

KEPPEL CORPORATION LIMITED SGX:BN4

Keppel Corporation - A Gift On Its 50th Birthday

Keppel Corporation delivered a 2% y-o-y drop in revenue to S$1.5b and a 44.4% increase in net profit to S$246.2m, such that 1H18 net profit accounted for 59% of our full year estimate. Earnings were exceptional items, results were generally within expectations.
On a half-year basis, net profit of S$583.6m was 38% higher compared to a year ago. Net gearing was healthy at 0.40x in 2Q18.

The O&M segment saw a net loss increase in the number of floating production projects awarded over the past year.
The recovery in the O&M business is expected to continue, but at an incremental pace.

Property remained the dominant contributor to net profit at S$603m in 1H18, followed by infrastructure at S$66m. Investments and O&M saw net losses of S$46m and S$40m in 1H18.
With regards to the property cooling measures in Singapore, Keppel Corp’s diversified portfolio (land sales in Singapore < 10% of total) means that it is less affected by this development compared to more Singapore-focused developers.
Still, we lower our valuations for the property segment with the recent correction of Singapore and Hong Kong/China listed developers such that our fair value estimate drops to S$8.70.

Meanwhile, Keppel Corp has declared an interim dividend of S$0.10/share for 1H18, higher than S$0.08/share in 1H17. In addition, as this year is Keppel Corp’s 50th anniversary, a special dividend of S$0.05/share has also been declared.
Assuming Keppel Corp pays a final dividend of S$0.14/share in 2H18 (same as 2H17), this translates to a dividend yield of 4.2%.
Do note that the ex-date for both the interim and special dividends is 25 Jul.

Low Pei Han CFA OCBC Investment Research | https://www.iocbc.com/ 2018-07-20

SGX Stock Analyst Report BUY Maintain BUY 8.70 Down 9.400