Keppel Corp

Keppel Corp: Turned in 2Q13 results which were slightly below estimates. Net profit at $346m (-33% y/y, -3% q/q) formed 22% of FY13 consensus estimates and brings 1H13 earnings to $703.7m, -45%. Revenue for the quarter at $3.1b (-12% y/y, +11% q/q) while operating margins was relatively stable at 14.1% versus the lows of 13% experienced in FY12. The lower y/y top-line was due mainly to reduced revenue booking from Keppel’s Offshore & Marine (-11%) and Property Divisions (-37%), which was partially offset by higher revenue from the Infrastructure Division (+13%). Despite the lackluster performance, management remains buoyant on prospects going into 2H13, citing strong demand for jack-up rigs particularly from Mexico. Add that the group is also moving up the value chain and has developed a new drillship design, which is expected to be commercialized in the near term. Year-to-date, Keppel’s O&M division has secured $3b of new orders in 1H13, double of that achieved y/y, bringing its net order book to $13.1b with deliveries extending into 2019. Perhaps what came as an early surprise was the change in leadership, where Keppel announced that CEO Mr Choo Chiau Beng will be succeeded by CFO Mr Loh Chin Hua in Jan14 and Keppel O&M CEO, Mr Tong Chong Heong will be succeeded by Keppel O&M COO, Mr Chow Yew Yuen on Feb14. Both Mr Choo and Mr Tong will remain as senior advisors on the board to ensure a smooth transition An interim cash dividend of 10 ¢ per share has been declared with additional dividend-in-specie of Keppel Reit units on the basis of 8 units for every 100 Keppel shares. After this round of distribution, Keppel would have disposed most of its direct stake (~5.6%) in Keppel Reit. Latest broker ratings as follow: Maybank-KE maintains Buy with $12.12 TP CIMB maintains O/p with $12.10 TP Credit Suisse maintains O/p with $12.50 TP Deutsche maintains Buy with $13.00 TP Nomura maintains Buy with $13.20 TP