Keppel Corp

Keppel Corp: signed management services agreement with Titan Petrochemicals Group Limited (Titan) and Titan Quanzhou Shipyard Co. Ltd to manage the TQS Shipyard. Importantly, Titan Petrochemicals Group’s major shareholder is SOE Guangdong Zhenrong Energy (GZE), engaged in oil and commodities trading. TQS is located in Fujian, is one of the largest shipyards in China, occupying 110ha with 3,600m length of coastline. The agreement is for a 30 year period, and will undertake projects using Keppel’s proprietary designs. When completed, the shipyard will have 4 ultra-large and wide dry docks, including one of the largest modern-designed docks in China, which will enable it to convert double hull vessels such as FPSO units. Besides ship repair and conversion capabilities, the yard is also able to construct offshore rigs including jackups and semisubmersibles. Maybank KE stresses that the agreement is conditional on the completion of the ongoing financial restructuring of Titan Petrochemicals Group and resumption of trading of its shares. Since this is a management contract, no capex requirement is needed on Keppel’s part Some positives Daiwa sees from this: 1) Tie up with GZE should allow Keppel to bid rig orders from China oil companies 2) Presence of GZE allows Keppel to access cheap financing terms from China banking sector 3) Keppel will license its rig designs on a project by project basis. Proprietary moduls and equipments will still be designed and manufactured in Singapore. Having this yard will allow Keppel to break into the China market, which has a strong preference for China-made products. Analysts in general, view this move positively Latest broker ratings: Daiwa: Buy, TP $13.70 MKE: Buy, TP $12.48 CS: O/PF, TP $12.70