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OCBC - Keppel Corporation Ltd: On course towards another earnings milestone
Yet another quarter of sterling results. KepCorp's revenue jumped 31.6% YoY for 3Q07 to S$2.6b, with higher revenue from all divisions. Net profit rose 23.1% YoY to S$247.7m. Net profit from O&M division grew by 16.5% YoY to S$126.5m, while Property division saw its net profit doubled to S$65m. Infrastructure division turned in the fourth straight quarter of profitability with a modest S$4m, the growth was moderated by higher gas cost incurred at the 500MW Cogen Power Plant.
YTD Net Profit exceeded total FY06 profit. For the first nine months of 2007, KepCorp's net profit of S$757.7m has already exceeded the total FY06 profit of S$751m. Meanwhile, over the same period last year, revenue grew by 37.1% YoY to S$7.1b. EPS improved from 36 cents to 48 cents. With the good results achieved, KepCorp looks poised to reach another earnings milestone in 2007.
Management reassures treasury controls in place. In view of the weakening US$ and the wake of distress treasury control concerns, the management reassured that all internal treasury controls are in place. The bulk of KepCorp's US$ currency exposure naturally hedged, as both the contracts secured and the cost of sales (eg. materials and equipments) are in US$. The excess US$ would then be hedged by selling forward contracts based on expected timing of the receipts.
Raising our earnings estimates. Since the last update in April 2007, KepCorp's O&M division has secured S$2.9b more contracts, bringing total contracts secure to-date at S$4.4b. Given the strong earnings growth thus far, we have revised our net profit projection for KepCorp in FY07 to S$1.04b, from S$972.5m previously to account for the higher earnings from the KepCorp's O&M division and the stronger than expected revenue from its property business segment. We have lowered our net profit projection in FY08 from S$1.24b to S$1.17b as we foresee the rising material and labour cost trend to lead to pressure in net margins.
Raising our fair value estimate. Taking into consideration the stock split and the strong earnings from the first nine months of FY2007, we have revised our fair value for KepCorp to S$16.20, using sum-of-the-parts valuation metric. This is mainly due to a change in 1) 8% revaluation of KepCorp's O&M division using PER 25x FY08 forecasted earnings, 2) the increase in market values for Keppel T&T and Singapore Petroleum, whilst keeping the property estimates unchanged. We reiterate our BUY rating on KepCorp.
KIM ENG - Matching Expectations
♦ Another strong quarter
Keppel Corp recorded another solid quarter: 3Q07 net profit rose 23% Y/Y to S$247.7m, but fell 4% from 2Q07. Turnover grew 31.6% Y/Y and 5.6% Q/Q. 9M07 net earnings of S$757.7m have already exceeded FY06 earnings of S$750.8. The results are broadly within our expectation. Overall margins remained healthy despite some expected decline in EBIT margins in the O&M division due to the usual profit recognition cycles.
♦ O&M remains the revenue leader, while infrastructure still stalled
Offshore and Marine (O&M) continues to be the revenue driver, accounting for 69% of total revenue. However, O&M turnover rose by just 3.8%, possibly indicating that capacity remains tight at the moment, particularly in its Singapore yards. Infrastructure, however, continued to disappoint ?the division posted EBITDA of just S$9.6m, slightly higher than the S$7.1m in 2Q07. Once again, Keppel said that costs associated to legacy projectscontinued to hold back earnings, as well as lower-than-expected profitability of its Keppel Merlimau co-gen plant due to higher natural gas feedstock costs stemming from the breakdown of its original gas supply agreement from Malaysia. However, Keppel remains confident of the division?s prospects, especially given its recent wins in Qatar, Algeria and Australia.
♦ Forex risk issue not endemic to offshore & marine industry
Unsurprisingly, in the wake of SembCorp Marine?s recent forex losses, there were queries about how Keppel manages its forex risks, and the controls that it has in place to manage the risks. Keppel responded that itsstrategic business units (SBUs) do not enter into forex contracts with banks without approval and control at the group level. In other words, forex contracts are transacted by the group treasury on behalf of the SBUs. Furthermore, whatever unhedged forex futures are reported by the SBUs and then reported to the board every month. We would like to reiterate that the recent problem that SMM experienced is not endemic to the offshore and marine industry as a whole, and is likely a risk that has to be managed by any company that has foreign currency exposure.
♦ Upping target price to S$15.60
Keppel?s O&M division will be the mainstay of the company for the foreseeable future, with its net order book at some S$11.1bn. All other divisions, with the exception of Infrastructure, continue to show healthy growth within their business segments. We are leaving our forward forecast unchanged, where we expect Keppel to post FY07 net earnings of S$1,102.5m. However, we are also adjusting our sum-of-the-parts fair value for Keppel to S$15.60 from S$15.00 previously, to reflect our new target price of S$11.45 for Keppel Land, as well as SPC?s price appreciation in the wake of record oil prices and progress in its upstream business. Reiterate BUY.
Keppel Corporation Limited
announced that Keppel Nantong Shipyard Co. Ltd, the wholly-owned subsidiary of Keppel Offshore & Marine Led has clinched three contracts worth a total of S$110 million (RMB$550 million), including owner furnished equipment, to build eight tugs.|
BusinessTimes September 28, 2007, 7.46 am (Singapore time)  |
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Deutsche cuts Keppel to hold, starts SembCorp Marine at sell
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SINGAPORE - Deutsche Bank has cut its rating for Keppel Corp to 'hold' from 'buy' and lowered the price target to $14.20 (US$9.48) from $15.30, citing rich valuations for the stock.
However, given that some of the orders might be large, decision cycles may be longer,' Deutsche analyst Pyari Menon said in a client note
UBS
Reiterate Buy rating with S$16.80 price target
On the back of the UBS CapitaLand report, published today, we highlight Keppel Corp as another company which has successfully grown its earnings base by venturing abroad. Keppel is now one of the largest offshore rig builders worldwide. It is also a prominent property developer in Asia and a credible player in Infrastructure projects globally.
Impressive growth outlook, robust business model and strong management We expect Keppel Corp to achieve strong 30% earnings growth in both 2007 and 2008. We remain bullish on Offshore. Keppel?s S$11bn order book should continue growing and we believe margins could surprise on the upside. Profit recognition on Singapore residential property sales should boost earnings in 2007 and 2008. Thereafter, we believe its overseas projects would kick in. Infrastructure is growing more slowly than expected but we believe opportunities for organic and non-organic growth are still positive.
Generous dividends, ROE should improve to 22% Dividends are generous and we believe Keppel Corp could sustain the 55% payout ratio in the medium term as its balance sheet has sufficient muscle. Net gearing is only 27% and we expect 2007E ROE to improve to 22%.
Price target based on sum of parts We value Offshore on 25x FY08 earnings. We believe mid-cycle valuations are justified, given strong order book visibility. We lower our SOTP-based price target slightly from S$17 to S$16.80 as the market value of the listed entities have fallen since our July 2007 update.
"That report provided support for the stock even with oil prices falling, and I guess the report did remind people that Keppel is one of those companies whose results will remain strong for some time to come," said a dealer.
UBS on Wednesday reiterated a "buy" recommendation for the stock, but lowered its 12-month price target for Keppel shares to S$16.80 from S$17, citing a fall in market values for the firm and its listed units since the last research update.
"We expect Keppel Corp to achieve strong 30 percent earnings growth in both 2007 and 2008," UBS analyst Cheryl Lee said in the report.
"Dividends are generous and we believe Keppel Corp could sustain the 55 percent payout ratio in the medium term as its balance sheet has sufficient muscle." Keppel's share price, which often tracks global oil prices, resisted Tuesday's sharp fall in London Brent crude
This baby is coming back after hitting low on William % at $12.2 yesterday and rebound close at $12.5
Same thing happen again today, tested low of $12.3 and rebound close at $12.6. Hope this baby come back fast and furious.
Potential and fundamental is there with recent report of new order clinch from Mexico yard worth $190mil.
still vested.....
Quote from DBS vickers"
"The quarterly earnings season is far from over and should continue to offer trading opportunities gievn that stocks have retreated from their recent highs. We are positive on offshore & marine, construction, financials, construction, hotels and selective on the technology sectors"
Kep Corp, SembCorp & Cosco Corp all recovering today....
All three go go go.....
Credit Suisse - BUY
TP - S$15.00
All big analysts are calling for BUY. So we should be expecting more upside on this counter than is happening now.
Keppel is looking good.
Keep going to cover back my loss.
CHEONG!!!
Interim Dividend of $0.09 per share comprising of the following:-
(i) $0.015 franked dividend per share less 18% tax
(ii) $0.075 dividend per share tax exempt (one-tier)
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Cum-Dividend period
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27 July 2007 to 7 August 2007
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Ex- Dividend period
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8 August 2007 to 13 August 2007
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3
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Record Date
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13 August 2007 (5.00 p.m.)
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Last day for Buying-In on a Cum basis unless extended by the Exchange
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14 August 2007
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Shares are good for delivery for sales on a Cum basis in the Buying-In Market if the shares are purchased on or before
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7 August 2007
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6
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Date Payable (for Dividend only)
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22 August 2007
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UOB KH - BUY
TP - S$15.20
1H07: Profit up 40% yoy, due to O&M and property divisions
Our FY07 net profit forecast remains at S$1.060b while our FY08 and FY09 forecasts have been raised by 2% and 15% respectively to S$1.300b and S$1.475b respectively on higher O&M and property earnings. We raise our target price by 22% from S$12.50 to S$15.20 based on our revised sum-of-theparts (SOP) valuation of S$15.18/share on the back of higher valuations for the O&M and property businesses.
Well said Spurs,
Kep Corp are among the top in the marine sectors as well. Potential blue chip stocks to hold for higher gain. Same for SembMar and Cosco. They are now the major marine players to meet the growing demand of jig-ups, semi-sub and FPSO.
If Kep Corp maintain the healthy order book, soon will hit the mark of above $15++ or going strong to $17 by end of year.
For me I am holding it for the next round of split shares to happen. It not far base on the performance it have after it split share this year in May. Split at about $9.75 and close recently at high of $14.1 in a span of 2 months. Off course this is supported by the high Oil price that trigger deep water exploration, giving the strong order books to the Marine Sectors.
With all been said, external factors still exist like BBs, OPEC direction, weather, WAR?, etc
Option is in your hands... Play with what you can manage...
These are the type of stocks to buy and hold at such times. Good fundamentals with decent dividends. I remembered buying and holding SembMarine during the last turmoil and making a few hundred Ks when market recovered.
Just a matter of time before it shoots past $15! Will buy somemore if it continues to drop next week. Not for contra players.
Really unexpected outcome.
Posted fantastic result, but still lost to the market. Closed at $13.30. Half a dollar gone.
Loaded again to see whether can have a quick gain on Monday. But still need US market to perform tonite.
Else will really eat grass for this month.
Loaded another 5 lots at bargain of $13.20.
If the analysts are correct, I'm sitting on at least another $2 upside.
Keppel Corp (S$13.80) - 2QFY07 results - Offshore & Marine rewarding, Infrastructure disappointing
2Q07 earnings rose 32% yoy to S$258.4m in line with our expectations and consensus. Revenue rose 49% to S$2.5bn driven by Offshore & Marine and Property divisions. Infrastructure was below expectations due to cost -overrun by some legacy projects in KIE division. We have downgraded our earnings for FY07 by 2% to reflect slower growth in Infrastructure division but revised upward our FY08-09 earnings by 3- 4% to account for stronger order book recognition in O&M division. Target raised to S$15.40 from S$ 14.60, based on sum-of-the-parts. Potential catalysts include new projects from infrastructure, launching of subsequent phase of Keppel Bay and megasized contract wins in O&M including P-56 in Q3. Maintain Outperform.