Keppel Corp

Keppel Corp: has secured a contract from Caspian Drilling Co, a subsidiary of the State Oil Company of Azerbaijan Republic (SOCAR), to build a semi-sub drilling rig for about US$800m. Scheduled for delivery in 4Q16, the rig will be customized for Caspian Sea’s harsh environment. This marks the first non-Petrobras drilling semi-sub contract for KEP since 2008, and should dispel concerns about the ability of the co to win such contracts. With this win, KEP’s ytd new orders amount to about $3.1b and appears on track to reach the Street’s FY13e estimate of btwn $5.5 – 6.5b. KEP’s orderbook at end 1Q13 stood at $13.1b, with deliveries stretching into 2019. Deutsche is optimistic that potentially more contracts may follow, as SOCAR has plans to construct 4 new offshore drilling rigs over the next 7 yrs and create employment for about 15,000 people. With limited competition in the region, along with KEP’s long term relationship with SOCAR, the house is confident that KEP is well positioned to benefit. Deutsche maintains its Buy rating with TP $13. Nomura reiterates Buy with TP $13.20; given few newbuild deliveries and high utilization, the house continues to be positive on semi-sub demand in 2013. Credit Suisse reiterates Outperform with TP $13.70, believes the contract reflects KEP’s near market, near customer strategy, allowing it to differentiate it from competing yards. Barclays maintains its Overweight rating with TP $13.30, keeps as the top pick in the rig building space given its strong order and financial outlook.