Keppel Corp

Keppel Corp: Latest US$242m jack-up-rig order is priced at a 22% premium to a similar rig awarded by Safin Gulf in Oct 11. CIMB believes the pricing may include a risk premium for its first rig-building job at its Kazakhstan yard as possible “local-content requirements” given that the work scope is shared with consortium partner Ersai Caspian. House believes yard could achieve operating margins of 12-15%, taking into account local content and higher risks. It says S’pore yards are focusing on niche high-spec jack-ups and seeking new markets rather than getting involved in drillship and semi-sub pricing wars. The latest order brings year-to-date contracts to >$7b, including the Sete Brasil LOI for 5 semi-subs, on track to meeting CIMB's $9.2b full-year target. It keeps an Outperform call with $14.80 target (vs street consenus of $13.02), citing Keppel as a blue chip to own in this choppy environment.