KEPPEL CORPORATION LIMITED (SGX:BN4)
Keppel Corporation - 1H21 A Decent Performance With Dividends The Highlight
- Keppel Corp reported a reversal of fortunes in 1H21 with a better-than-expected net profit of S$300m vs a loss of S$537m in the year-ago period. Even excluding exceptional items and government grants, the company would have reported a solid net profit of S$280m.
- The highlight of the results was Keppel Corp’s declaration of an interim dividend of S$0.12 vs S$0.03 in 1H20.
- Maintain BUY rating on Keppel Corp. Target price raised to S$6.48 (previously S$6.37).
Keppel Corp's 1H21 Results
- Strong 1H21 results despite challenges. Keppel Corp (SGX:BN4) reported a strong 1H21 with revenue rising 16% y-o-y to S$3.7b resulting in a net profit of S$300m vs a loss of S$537m in 1H20, which arose due to S$1b in impairments. See Keppel Corp's announcements.
- We note that excluding exceptional items and government grants, Keppel Corp’s 1H21 net profit of S$280m was even higher than 1H19’s net profit of S$149m. The better-than-expected performance in 1H21 was attributed to strong operational performance from the urban development, asset management and energy & environment business segments.
- Positive surprise on dividends. Keppel Corp declared an interim dividend of S$0.12/share which is significantly higher than the S$0.03/share paid in 1H20 and even higher than 1H19’s interim dividend of S$0.08/share. We have upgraded our dividend estimate for 2021 to S$0.20/share (implying a 3.7% yield) and we expect consensus to upgrade as dividend estimated for this year were S$0.17/share.
Stock Impact
- The urban development segment saw a 115% y-o-y increase in units sold, and a 177% y-o-y increase in revenue to S$2.5b. It was notable that all of Keppel Corp’s key markets contributed to the strong decline further as the company guided that it will look to achieve the higher end of the S$3-5b target by end-23.
Upgrading Keppel Corp's 2021 earnings forecast.
- We raised our 2021 earnings estimates for Keppel Corp by 32% to take into account the stronger-than-expected 1H21 performance of the urban development and asset management businesses.
- See
- We retain our BUY rating on Keppel Corp with an upgraded SOTP-based target price of S$6.48. Our SOTP-based valuation conservatively values KEP O&M unit at S$100m (since its end-20 book value was –S$659m) and thus a divestment in excess of this would be accretive to our target price.
- Catalyst to Keppel Corp's Share Price:
- Finalisation and disclosure of the valuation of the O&M assets that will be divested.
- Announcement of partial or full sale of its Southeast Asian or Australian logistics business.
Adrian LOH
UOB Kay Hian Research
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https://research.uobkayhian.com/
2021-07-30
SGX Stock
Analyst Report
6.48
UP
6.370
