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Author: kimeng   |   Latest post: Thu, 15 Apr 2021, 5:22 PM


Keppel Corporation - O&M earnings in line

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  • O&M earnings in line, but Infrastructure negative surprise on new provisions.
  • Proposed final cash dividend of S$0.300/share.
  • Maintain "Accumulate”, with a revised TP of S$12.34.

Keppel  Corp’s  FY13  “recurring”  net  earnings  (excluding  revaluations)  of S$1,412mn  (-18%  yoy)  was  slightly  below  with  our  estimate  of  S$1,531mn  and consensus’  of  S$1,512mn.  Inclusive  of  revaluations,  FY13  “reported”  net  profit were  at  S$1,846mn.  In  addition,  the  group  proposed  a  final  cash  dividend  of S$0.300/share  (versus  S$0.270/share  for  FY12).  Coupled  with  the  interim  cash dividend of S$0.100/share as well as the interim dividend in  specie of Keppel REIT units equivalent to S$0.095/share, full-year DPS amounts to S$0.495 in 2013.

How we view this

Keppel Corp’s O&M  earnings were  in line with a FY13 operating margin of 14.6% (versus  13.5%  in  FY12).  Albeit  4Q13  O&M  margin  was  14.2%  (-225bps  qoq),  it remained at a respectable level of more than 14%, in our view.

Infrastructure  incurred  a  net  loss  of  S$14mn  in  FY13  due  to  cost  overrun  and prolongation cost for its EPC projects in Qatar and Manchester. That said, Phase I of the Manchester projects is substantially  completed  and will be going through commissioning,  while  the  Qatar  project  is  ready  for  final  commissioning  before the targeted handover later in the year.

The  group  secured  about  S$7.2bn  worth  of  order  wins  in  2013,  taking  its  order backlog  to  a  record  high  of  S$14.2bn  as  at  end  2013  (versus  S$12.8bn  in  2012). According  to  management,  enquiry  levels  remain  healthy  and  the  O&M  outlook continues to be positive, on the back of rising global E&P capex with deepwater investments of over US$223bn expected to be spent between 2013-17.

Investment Action

We continue to like Keppel Corp for its i) resilient O&M margins over the next two years,  ii)  healthy  orderbook  with  visibility  till  2019,  and  iii)  respectable  dividend yield  of  more  than  4%.  We  cut  our  FY14E  earnings  estimates  by  8%  to  factor  in lower  estimates for Infrastructure, while we raise our FY14E order win target  to S$7bn from S$6bn. We roll forward our SOTP-based valuation to FY15E and raise our target price to S$12.34. Maintain Accumulate.

Source: Phillip Securities Research - 24 Jan 2014

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Keppel Corp 5.31 0.00 (0.00%) 1,074 

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