Keppel Corp

Keppel Corp: 3Q10 results ahead of expectations. Turnover fell 19% to $2.5bn, but net profit +8% yoy, flat qoq, at $346m vs avg mkt est of $284m. Margins rose for the O&M segment, on higher bookings as more projects reached completion, and for the property segment, driven by contributions from Keppel Land and the Keppel Bay projects…

Mgt remains upbeat on outlook, sees higher enquiries, more orders on the O&M side. Near term, market likely to react positively to results, mgt outlook. Expect further boost to sentiment on letter of intent from Mermaid Maritime for 2 jackup rigs worth US$360m, with options for another 2 rigs. Keppel has also awarded a $900m capex contract to Alstom, to expand its natural gas fired Keppel Merlimau Cogen plant on Jurong Island...

Further ahead however, we flag Keppel’s declining order book, which has dropped to $4.1b at end 3Q10, from $4.8b at 2Q, $5.6b at end FY09. FCF has reversed from +$1b to -$1b, which may be a sign of slower order uptake as well. Mkt watchers tip further delays in award of the Petrobras contracts. Infrastructure also likely to remain a drag, given cost overruns, delays in its Qatar project…

Still Deutsche maintains Buy with $11.45 target.
UOBK maintains Hold, but raises target to $9.20 from $8.85 to reflect better than expected 3Q numbers.