Keppel Corp

Keppel Corp: FY13 core net profit of $1.41b (-26%)missed estimates of $1.51b, while 4Q13’s net profit was $332m (+9%). The miss was mostly resulted by an unexpected estimated $150-200m provision taken by Infrasructure division. Revenues for FY13 were $12.4b (-11%) FY13 saw Offshore & Marine revenue, which contributed more than half of topline, fell 11% to $7.1b as many jobs started in the year had not reach revenue recognition stage. Revenue contribution from Infrastructure Division of $3.5b was 22% higher due mainly to higher revenue contributed by the co-generation power plant in Singapore. Property Division revenue fell 41% to $1,3b largely due to drop in sales recognition of Reflections at Keppel Bay units as a result of the deliveries of residential units sold under the deferred payment scheme in 2012. For 4Q13, KEP’s O&M segment reported a sharp 35% q/q jump in revenue to $2.1b, as more jackup projects reached recognition milestones. Segment operating margin, while healthy at 14.2% in 4Q13, was 2.3ppt lower q/q, due to fewer rig deliveries and change in revenue mix. Meanwhile, the provision taken by the Infrastructure business resulting in a 4Q13 $111m loss in was due to cost overruns and other costs at its Doha and Manchester EPC projects. The unit has also made claims for variation, prolongation and extension of time for two Qatar projects. Going forward, Net orderbook at end Dec was $14.2b, with visibility to 2019. Infrastructure wise, the Runcorn EPC is expected to be substantially completed in 2014. Keppel sold 900 homes in Asia in 4Q and MBFC T3 is now 95% full. Still, KEP remains the street’s preferred large cap pick in the sector, backed by its strong order book visibility. The group ended FY13 with a net order book of $14.2b, with deliveries stretching into 2019. NAV as at end Dec was $5.37, translating to P/B of 2x. Final dividend of 30₵ declared, bringing full year dividends to 49.5¢/share, yield attractive at 4.5% Latest broker ratings: CLSA: Maintain Buy, TP: $12.40 CS: Maintain O/F, TP reduced to $12.70 from $12.90 MKE: Maintain Buy, TP: $12.48 Deutsche: Maintain Buy, TP reduced to $12.20 from $ 12.70 Daiwa: Maintain Buy, TP increased to $13.70 from $13.20