Keppel Corporation - OCBC Investment 2019-01-04: Still Active In China

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KEPPEL CORPORATION LIMITED (SGX:BN4)

Keppel Corporation - Still Active In China

• Building homes in Chengdu.
• Growing commercial portfolio in Beijing.
• O&M segment to continue recovery.

Developing new residential site in Chengdu

• KEPPEL CORPORATION LIMITED (SGX:BN4) recently announced that Keppel Land China has secured a 4.7ha residential site in Chengdu, Sichuan province in China for RMB889.7m (~S$183.4m) via a government land tender. The site is in the Chengdu Tianfu New Area, and will be developed into a residential community comprising 768 units of high-rise apartments and 96 units of low-rise apartments. Targeted at home upgraders, the project is expected to be launched in 4Q19.
• Based on a 30% stake, Keppel Land China’s total development cost (includes land cost) for the project is expected to be in excess of RMB519m (~S$107m).
• Keppel Corp has a good history of building homes in Chengdu with six residential projects there. The group has launched about 17,800 homes in Chengdu, which are almost all sold out.

Acquiring commercial property in Beijing

• A unit of Keppel Land has also entered into an agreement with A Li Yun Shan (Beijing) Business Consulting to acquire a completed commercial property in Haidian District, Beijing, for RMB555m cash (~S$111m). The transaction is expected to be completed in 1Q19.
• The acquisition is in line with Keppel Corp’s strategy to grow its commercial portfolio in China, with a focus on first-tier cities. Securing the project is opportune considering that it is a completed asset enjoying almost full occupancy and in a city where supply for quality commercial developments is limited.

O&M division to continue its gradual recovery

• Keppel Corp also recently announced that its offshore marine division has secured about S$300m worth of contracts for the design and construction of an ice-class LNG bunker vessel, refurbishment of a FPSO, and 65 scrubber retrofit projects. With these we estimate that new orders worth about S$1.7b were secured in 2018, compared to S$1.1b in 2017. For 2019, we are forecasting S$2.5b of new orders.
• Meanwhile we tweak our estimates and update the market values of Keppel Corp’s listed entities, such that our SOTP-based fair value estimate slip from $7.97 to S$7.25.
• Maintain BUY.

Low Pei Han CFA OCBC Investment Research | https://www.iocbc.com/ 2019-01-04

SGX Stock Analyst Report BUY MAINTAIN BUY 7.25 DOWN 7.970