Keppel Corp

Keppel Corp: there have been a series of downgrades by the Street within the month, starting first with Macquarie. Yday, DMG was the latest house to downgrade the big-cap offshore marine from Overweight to Neutral, citing i) intense competition from South Korean and Chinese yards will have impact on margins and order wins, as shipyards may find it tough to meet bullish expectations on new orders in 2013, ii) rise in rig prices may be limited given availability of slots at major yards and cap room for margin expansion; iii) earnings downgrades are not over, given its FY13-14F earnings forecasts are 10-15% below consensus. Therefore O&M valuations are unlikely to test upcycle multiples. DMG downgraded Keppel to Neutral (TP $10.43), but maintained Buy on SCI (TP $5.66) and Neutral on SMM (TP $4.61).