Keppel Corp: secures a contract to build an enhanced KFELS Super A Class harsh environment jackup rig from Ensco for US$245m. The rig is scheduled for delivery in 3Q14. This contract is from the exercise of 1 of 2 options, which was part of Ensco's order of two KFELS Super A Class rigs in Feb 2011. Back then, rig price was US$220m, so there has been an improvement in the pricing.
This contract brings KEP’s ytd orderbook to a record $8.6b. Of the 12 rigs ordered this yr, 8 are from exercised options. In total KEP currently has 47 projects of which 24 are jackups. KEP also has 5 options outstanding worth an aggregate US$1b.
This is positive news for Keppel's O&M division, which allays market fears that rig orders could potentially dry up in the current market environment.
HSBC maintains KEP at Overweight with TP $13.45, on strong O&M spend expected in 2011-13. Keeps the company in its Asia Super Ten equity portfolio recommendation.
Technically, the stock remains in a longer term downtrend, but may see near term upside after being oversold. The stock has bounced smartly off the $7 psychological support, and both Stochastics and RSI are reversing out of oversold territory. See first resistance at $8, followed by $8.50.
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