Keppel Corporation - OCBC Investment 2018-09-10: Staying The Pace

KEPPEL CORPORATION LIMITED SGX:BN4

Keppel Corporation - Staying The Pace

Upstream recently reported that Golar LNG is evaluating alternative shipyards to build future FLNG vessels. Recall that in Jul 2014, Dec 2014 and Jul 2015, Golar LNG had contracted with Keppel Corp to convert its existing vessels, Hilli, Gimi and Gandria into FLNG vessels. Hilli Episeyo has been delivered and is currently operating off Cameroon for Perenco, while Keppel Corp had confirmed in Apr this year that it was in discussions with Golar on FLNG conversion projects for the BP Tortue field. This would likely require the use of Gimi, and the notice to proceed is till end this year.
Golar had mentioned that other shipyards may offer “more attractive payment terms and long-term financing packages”, and that they “have confidence that a Chinese solution for FLNG is viable”. While there has been some market worry for Keppel Corp, based on the transcripts by Golar, it appears that the discussion with non-Singaporean yards are based on using Golar’s Mark 2 design, i.e. for newbuilds. Keppel Corp’s work, on the other hand, involves the conversion of vessels.

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On the property side, it was disclosed last week that another plot of land in the Sino-Singapore Tianjin Eco-City (SSTEC) has been successfully bid for. The plot is meant for residential use, with a total site area of 8.77ha. This is the second plot of land sold in 2H18, and was won by Tianjin Yeshine Group at RMB 1.46b. This translates into about RMB 6,700 psm of GFA or RMB 166m/ha.
Comparing the land price based on land area, the transacted land plot has fetched higher values than previous transactions. However, on a GFA basis, the price is lower. We do note that the pricing for each plot varies according to the characteristics such as location and access to amenities, amongst other factors.
Meanwhile, we update our SOTP-based fair value and also account for the group’s latest sale of its direct stake in Keppel DC REIT. As such, our fair value estimate slips from S$8.70 to S$8.38.

In May 2018, the world’s first vessel conversion floating LNG production unit was commissioned in Cameroon, Africa, providing proof of concept for the FLNG conversion technology, which is more economical and faster to deploy than newbuilds. The unit is Hilli Episeyo, which is converted from Golar LNG tanker Hilli that was originally built in 1975. This is different from the world’s first FLNG project in 2016 which was a newbuild – Malaysia’s PFNG1 (FLNG satu) by Petronas.
According to Bloomberg New Energy Finance, two more FLNG conversions are expected to reach final investment decisions this year and to come online before 2025 – Fortuna LNG and Tortue FLNG. New purpose-built FLNG vessels that may come in the next few years include Prelude FLNG, Coral FLNG and Petronas’ second FLNG project.

On the property side, it was disclosed last week that another plot of land in the Sino-Singapore Tianjin Eco-City (SSTEC) has been successfully bid for. The plot (Jinbinsheng Transfer (Listed) 2018-3) is meant for residential use, with a total site area of 8.77ha. This is the second plot of land sold in 2H18, and was won by Tianjin Yeshine Group through its wholly-owned subsidiary at RMB 1.46b. This translates into about RMB 6,700 psm of GFA or RMB 166m/ha. Comparing the land price based on land area, the transacted land plot has fetched higher values than previous transactions. However, on a GFA basis, the price is lower (refer to table below for more details).
It is important to look at both land price based on land area, as well as that based on GFA – the former because SSTEC had previously bought the land from the Tianjin government based on land area, while the latter could be more relevant for property developers looking to make bids.
Meanwhile, we do note that the pricing for each plot varies according to the characteristics of the site, including location and access to amenities, amongst other factors. The land plot is in the Eco-City’s Central District, adjacent to the picturesque Eco-Valley and near Nankai High School and Nankai Primary School.
This latest transaction is expected to be completed in Oct 2018.

Low Pei Han CFA OCBC Investment Research | https://www.iocbc.com/ 2018-09-10

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