Towards Financial Freedom
USD226m Jackup Order From Falcon Energy
Keppel has secured a USD226m contract from a subsidiary of Falcon Energy to build a customised KFELS Super B Class jackup rig. The latest order lifted its YTD order win to SGD2.2bn and net order book to SGD15bn. The YTD flow of new orders is within expectations and accounts for 43% of our full-year forecast. We maintain our FY13-FY14F EPS estimates and NEUTRAL rating on Keppel, at a TP of SGD11.21.
- Jackup rig to be delivered in 3Q2015. The jackup rig is ordered by FTS Derricks, a subsidiary of Falcon Energy, and will be delivered in 3Q2015. Payment for the rig will be 25% upfront and 75% upon delivery, a slight improvement from the 20/80 payment structure offered to most customers in 2012. The price of the rig for Falcon is 10% higher than the normal workhorse B Class jackup rig as the Super B Class is equipped with the ability to drill in high-temperature and high-pressure wells.
- Falcon Energy is a new customer. Falcon Energy is listed on the SGX with a market capitalization of SGD301m. This will be the third jackup rig that it has ordered; the first two GustoMSC CJ46-x 100-D jackup rigs are now under construction at China Merchants Heavy Industry (CMHI).
- Maintain Neutral, TP at SGD11.21. We valued the stock with a sum-ofthe-parts (SOTP) approach: i) its offshore & marine segment, at 16x FY13F P/E, ii) the profits from Keppel Bay developments, iii) its infrastructure at book value, iv) its stake in Keppel Land at a consensus TP of SGD4.22 per share, v) the market value of its stakes in other listed companies, and vi) apply a 10% discount to the SOTP.
- No near-term upside catalyst. The normalising offshore & marine margins, property-cooling measures in Singapore and China and the slow turnaround in its infrastructure unit are likely to cap Keppel's rerating process in the near term. Our FY13-FY14F EPS estimates are below that of the consensus. We are more conservative on its O&M margins, at 12.6% for FY13F and 11.5% for FY14F.
Source: OSK
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