Keppel Corp

Keppel Corp: 1Q13 results in line to above consensus. Net income was down 56% yoy to $331m, though the weaker yoy performance was expected, due mainly to lumpy profit recognition of Reflections at Keppel Bay last year. On a positive note, O&M operating margin improved to 14.1% in 1Q13, vs ~13% levels over the preceding 3 quarters. This is despite conservative profit recognition for its first Sete Brasil semisub unit, generally thought to be lower margin. As such, while mgt maintains conservative long term margin guidance of 10-12%, analysts think O&M margins could surprise at a higher 14.2% this year. KEP’s ytd new orders at $2.1b appear on track to reach Street FY13 estimates of btwn $5.5 – 6.5b. Net order book is at a record high of $13.1b, providing good earnings visibility. KEP maintains that enquiries are still healthy and guides for at least one semisub order by 2H13. Maybank KE reiterates Buy, adjusts TP upward to $12.85 from $12.80, says fundamentals in the O&M space remain intact. Credit Suisse maintains Outperform with TP $13.70, reiterates as top pick within the Singapore O&M sector. Deutsche maintains at Buy, on lower TP of $13.00 (from $13.50), noting that share price may see some near term volatility on oil price weakness. Nomura keeps at Buy with TP $13.20.