keppel offshore and marine shipyard

Keppel’s Stock Faces Tug of War, UOB KayHian Maintains Buy Call

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November 24, 2012

Keppel Shipyard – Tuas, image: Keppel O&M

0618 GMT 22 November [Dow Jones] STOCK CALL: Keppel’s (BN4.SG) stock faces “a tug of war between good contract wins and margin concerns,” UOB KayHian says, adding the market will need 2-3 more quarter’s results to find the O&M margin floor. It cuts its target to S$12.30 from S$12.80 after lowering its 2013 net profit forecast by 4% on a lower O&M margin assumption of 12.5% for 2013-14, down one percentage point; it keeps its 2014 earnings forecast unchanged as it expects higher infrastructure earnings.

“We believe Keppel stands a good chance of registering higher O&M margins than SembMarine (S51.SG) as it is building semi-submersible rigs (semi) for Brazil. These are not new products to Keppel, while SembMarine is building drillships for the first time and for Brazil.” UOB-KH keeps its 2012-2014 contract-win assumptions unchanged at S$10 billion, S$6 billion and S$6 billion respectively.

It notes Keppel won a tender to build two semi-sub drilling rigs for Naftogaz; if the contract is finalized by year-end, Keppel’s 2012 contract wins would be S$10.2 billion, it estimates, in line with its forecast. It keeps a Buy call. The stock is up 0.5% at S$10.60.

Leslie Shaffer, (c) 2012 Dow Jones & Co


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