Monday, October 29, 2012
Keppel Corp: Macquarie downgrades to Neutral from Outperform, expecting further upside is limited amid a lack of catalysts and declining earnings. Expects Keppel's earnings profile to decline by 3% over 2011-14 amid a decline in property earnings and a weak OM margin profile. Says, over-reliance on jack-up orders could hurt Keppel amid slowing demand, with its ex-Petrobras orderbook filled with jack-ups. While semisub orders could compensate for jack-up orders' lack, Keppel hasn't won any ex-Petrobras semisubs in four years; while the house believes semisub orders will be back with a bang in 2013, it remains to be seen how much Keppel benefits from that given competition from Korean players like DSME and HHI, and local competitor SMM has stepped up in the last three years. Says Keppel risks empty slots once jack-ups start getting delivered. Macq cuts TP by 3% to $11.60 after lowering 2012-13 earnings forecasts by 2%-3%. Tips switching to SMM on a stronger earnings profile, its venture into the lucrative drillship market, potential margin upside from its new Singapore shipyard, a more-balanced order-book mix, higher chances of a special dividend and as a cheaper and pure sector play. Rates SMM at Outperform with TP $6.00. Keppel loses 3.0% to $10.77; SMM falls 2.5% to $4.73.