Keppel Corporation
Cautiously forward
SINGAPORE Company Update
23 January 2009
Maintain
HOLD
Previous Rating: HOLD
S$4.04
Fair Value: S$4.40
General Data
Issued Capital (m) 1,593
Mkt Cap (S$m/US$m) 6,436 / 4,296
Major Shareholder Temasek Holdings (21.2%)
Free Float (%) 78
NAV per share (S$) 2.81
Daily Vol 3-mth (‘000) 9,680
52Wk High (S$) 12.500
52Wk Low (S$) 3.350
Kelly Chia
(65) 6531 9817
e-mail: kelly@ocbc-research.com
Offshore surprises.
Keppel Corporation (KepCorp) reported topline growth of 13.2% YoY to S$11.8b for FY08 while net profits inched ahead 6.9% YoY to S$1.09b. The results exceeded our expectations in view of a S$3b revenue spurt from the Offshore and Marine business in the final quarter. KepCorp's order book of S$10.8b consists of deliveries stretching till 2012.
Upwards, but cautiously.
We have revised our previously bearish FY09F estimates to cater for better guidance from management that KepCorp's "yards will be busier in 2009 than 2008" and its plan to deliver up to 14 rigs will load its coffers with delivery payments. KepCorp's Infrastructure division will become a major revenue contributor (~30%) in FY09F and this has also aided in bumping up our forecasts. However, our enthusiasm is tempered by the possibility of delays in payments and rig deliveries. Overall, our FY09F revenue and bottomline estimates are revised 18% and 21%
higher.
Property drags.
Keppel Land's (KepLand) revenue for 4Q08 plunged 46.8% YoY to S$197.4m due to completion of projects in previous quarters and a slowdown in property sales. No provisions were made but we reckon that there is still looming risk over write-downs of its investment properties. KepLand's high earnings concentration towards the residential and office sectors puts it at high earnings risks. As such, we have incorporated lower forecasts and decided to peg a higher effective group discount rate of 50% to our valuation.
Possible positive surprises.
KepCorp also announced that its Sino-Tianjin venture has entered into an MOU with Sembawang Engineers and Constructors for feasibility study for the development of a US$1b solar polysilicon production plant. While details are not available yet, we are hopeful that this could translate to an EPC contract. On the M&A front, management updated that it is on the prowl for good companies that are currently heavily geared and have become cash strapped due to an aggressive expansion drive in the last 2 bull years.
Maintain HOLD.
Since our last report that iterated our cautious stance, KepCorp fell ~11%. However, our SOTP fair value has been bumped up to S$4.40 (prev. S$4.00) as we work in less bearish estimates. We are maintaining our HOLD rating as we take a wait-and-watch stance for the time being to let any residual delays and cancellations be flushed out of the system. We will become buyers at its recent lows of ~S$3.95.
Showing posts with label Stock: KeppelCorp. Show all posts
Showing posts with label Stock: KeppelCorp. Show all posts
Thursday, January 29, 2009
Keppel Corp Full Year 08 Results
Keppel Corp
Jan 28 close: $4.18
DMG & Partners Securities, Jan 23
FY08 earnings in line with market expectation:
Keppel Corporation reported record FY08 revenue of $11.8 billion (+13.2 per cent year-on-year) aided by higher contributions from O&M and Infrastructure divisions. Core recurring FY08 profit after tax and minority interest (Patmi) of $1.1 billion (+6.9 per cent y-o-y) was in line with the market consensus' estimates of $1.07 billion. While Keppel's FY08 results were credible, total distribution of 35 cents/share declared was slightly disappointing. This implied a gross dividend payout of 51 per cent - the lowest in five years - and at the lower end of management's guidance of 50-60 per cent.
O&M to face headwinds:
O&M's FY08 revenue of $8.6 billion (+18 per cent y-o-y) accounted for 73 per cent of Keppel's revenue, while O&M's FY08 Patmi of $705 million (+35 per cent y-o-y) contributed to 64 per cent of Keppel's Patmi as the division saw the successful completion of 13 jack-ups and three semis. Having current backlog orders of $10.8 billion, the management maintained that the yards would still be busy, with 10 jack-ups and six semis stipulated for delivery in FY09. However, we reiterate our cautious stance on the O&M sector, and opine any significant newbuild contract to occur only in H209 soonest. Our FY09 and FY10 new order estimates stay at $2.2 billion and $2.6 billion respectively.
Not time for a 'buy' yet, downside risks persist:
We advocate that it is still too early to turn buyers on this counter. Downside risks persist, including potential orderbook cancellations and sustained period of depressed oil price. However, we are comforted that Keppel's improved ROE of 22.4 per cent, strong free cash flow of $1.9 billion and net cash position of 0.04x will strengthen Keppel's ability to weather through this crisis.
Our recommendation stays at 'neutral', with a revised TP of $4.48 (from $4.53 previously) due to DMG's revised TP of $1.80 (from $2 previously) for Keppel Land and updated market values for the listed entities. NEUTRAL
Jan 28 close: $4.18
DMG & Partners Securities, Jan 23
FY08 earnings in line with market expectation:
Keppel Corporation reported record FY08 revenue of $11.8 billion (+13.2 per cent year-on-year) aided by higher contributions from O&M and Infrastructure divisions. Core recurring FY08 profit after tax and minority interest (Patmi) of $1.1 billion (+6.9 per cent y-o-y) was in line with the market consensus' estimates of $1.07 billion. While Keppel's FY08 results were credible, total distribution of 35 cents/share declared was slightly disappointing. This implied a gross dividend payout of 51 per cent - the lowest in five years - and at the lower end of management's guidance of 50-60 per cent.
O&M to face headwinds:
O&M's FY08 revenue of $8.6 billion (+18 per cent y-o-y) accounted for 73 per cent of Keppel's revenue, while O&M's FY08 Patmi of $705 million (+35 per cent y-o-y) contributed to 64 per cent of Keppel's Patmi as the division saw the successful completion of 13 jack-ups and three semis. Having current backlog orders of $10.8 billion, the management maintained that the yards would still be busy, with 10 jack-ups and six semis stipulated for delivery in FY09. However, we reiterate our cautious stance on the O&M sector, and opine any significant newbuild contract to occur only in H209 soonest. Our FY09 and FY10 new order estimates stay at $2.2 billion and $2.6 billion respectively.
Not time for a 'buy' yet, downside risks persist:
We advocate that it is still too early to turn buyers on this counter. Downside risks persist, including potential orderbook cancellations and sustained period of depressed oil price. However, we are comforted that Keppel's improved ROE of 22.4 per cent, strong free cash flow of $1.9 billion and net cash position of 0.04x will strengthen Keppel's ability to weather through this crisis.
Our recommendation stays at 'neutral', with a revised TP of $4.48 (from $4.53 previously) due to DMG's revised TP of $1.80 (from $2 previously) for Keppel Land and updated market values for the listed entities. NEUTRAL
Subscribe to:
Posts (Atom)
