Keppel Corp

Keppel Corp: secured a US$210m contract from PV Drilling (a subsidiary of PetroVietnam) for construction of a jackup – its 8th such order this year. With a tight delivery schedule of less than 20 mths (by 1Q15), this project could earn a higher margin, evidenced by the 2% premium (US$5m) in pricing vs the B class rigs ordered in Mar ’13. PV Drilling’s order opens a new market for offshore yards. Rising population and growing economic strength in SE Asia has led to a strong increase in oil and gas consumption and govts and national oil companies alike are making efforts to step up exploration and devt of reserves. Underpinning the positive rig demand outlook, PV Drilling notes strong increases in dayrates for its own and rented rigs, and expects to invest 1-2 new rigs in the medium term. With this latest order, KEP has secured ~$3.4b worth of orders year to date, which is on track to reach the street’s FY13 estimate of between $5.5b and $6.5b. Keppel’s orderbook stands at ~$14.4b, with deliveries stretching into 2019. Nomura reiterates Buy with TP $13.20, supported by an attractive 4.4% dividend yield. CIMB reiterates Outperform with TP $11.90, recommends investors to buy into the counter’s current weakness. Expects strong margins from the peak delivery of rigs in 2013 to drive share price.