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Simons Trading Research

Author: simonsg   |   Latest post: Mon, 6 Jun 2022, 4:02 PM

 

Keppel Corporation - FY21 Strong Results With a Nice Dividend Surprise

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  • Keppel Corp (SGX:BN4) reported a very strong set of numbers for 2021 with all business segments registering improved performances y-o-y.
  • With net debt down to a manageable 0.68x as at end-21, the outlook appears very favourable given our expectation for better economic conditions ahead, and continued progress in Keppel Corp’s asset monetisation programme. Maintain BUY.

Keppel Corp's 2021 Results

  • Stronger-than-expected results. Keppel Corp reported stronger-than-expected 2021 revenue which rose 31% y-o-y to S$8.6b generating a net profit of $1.02b vs a loss in 2020. Importantly, Keppel Corp reported sequentially better profitability as its 2H21 net margin doubled to 14.6% vs 1H21. These robust results were attributable gains from divestments and asset sales, as well as stronger operating performances from its property, connectivity and asset management businesses.
  • Dividend bonanza. Since Oct 20, Keppel Corp has divested around S$2.9b and is on track to exceed its S$5b target by 2023. As a result of this cash inflow, Keppel Corp declared a 2H21 dividend of S$0.21 resulting in a total dividend of S$0.33 for 2021, which implies a yield of 6.2% using today's closing share price. We have maintained our forecast 40% dividend payout ratio for Keppel Corp in 2022-24.

Keppel Corp's Outlook Appears Bright

  • During the results briefing, Keppel Corp guided for the impact of labour and supply chain issues. It stated that while its yard activity has been normal, a recent challenge has been to bring in new labour (since its workforce has declined by 6% y-o-y). However, Keppel Corp has temporarily managed to solve this by allocating jobs to its network of global yards and allowing its Singapore yard to handle the integration parts of its projects instead.

Changes to Our Earnings Forecasts for Keppel Corp

  • We have increased 2022E and 2023E earnings of 14.8x which is a slight discount to its past five-year average of 15.2x.
  • Catalysts:
    • 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.

Source: UOB Kay Hian Research - 28 Jan 2022

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