Keppel Corp

Keppel Corp: Keppel Corp has secured its first rig building contract for the year, after announcing the construction and delivery of a KFELS B Class jack-up rig worth ~US$218m to Malaysia’s UMW Oil & Gas. The rig is scheduled for delivery in 3Q15 and will become the third KFELS B Class rig for UMW Oil and Gas. The US$218m pricing is higher than the US$205-210m price range for the standard KFELS B Class rig orders which were placed in 2013. This could be due to the shorter delivery time for the rig, which is less than 19 mths compared to a normal build time of 22-24 mths. Overall, Maybank-KE notes that premium rigbuilding yards in Singapore have been able to exercise some pricing power by offering fast-track delivery option given their superior execution track records. This would lead to defensible margins in the face of intense competition from Chinese and Korean yards. In addition, Keppel’s ability to attract repeat orders from existing customers also demonstrates the quality and reliability of its product. At the current price, Keppel Corp trades at 11.7x forward P/E versus closest peer Sembcorp Marine’s 15.8x. Maybank-KE maintains Buy with $12.48 TP.