Friday, January 23, 2015

Keppel Corp

Keppel Corp: 4Q14 revenue of $3.9b (+9.1% y/y) and net profit of $725.9m (+6.1%) were broadly in line with street expectations, though lifted by one-off gains from disposal of infrastructure and property assets and divestments of associates. Final dividend proposed is $0.36 (vs $0.30 in 2013), bringing full year to $0.40 (vs FY13 $0.48). The offshore & marine (O&M) sector, assumed to be badly hit by plunging oil prices, is the key focus. Revenue grew 14.6% y/y but operating margin fell (by 1.8ppt) for the first time since 2Q12. Net profit was almost flat at $286.8m (+0.88%), but order book is robust at $12.5b. Results from the property sector were distorted by one-off gains of MBFC, Equity Plaza and Al Mada Tower in Jeddah, offset by lower fair value gains on its investment properties. As such, while revenue surged 70.8%, profit at operating and net level dropped 34.5% and 46.8% respectively to $343.1m and $261.4m. Infrastructure sector recorded a 28.8% drop in revenue ($685.4m) due to its power general plants, partially offset by improvements in data centre and logistics business. Operating profits ($304.7m) were boosted by divestment of the two more profitable data centres to Keppel DC REIT, which is now an associate. Looking ahead, management admits the O&M large environment is challenging in view of lower oil prices and projected oversupply of rigs. Nonetheless, net order book of $12.5b as at end of 2014 should keep yards busy through 2016. Keen competition in the power generation and electricity market is likely to stay. Exposure to Brazil, a key concern of investors due to Petrobras’ corruption scandal, makes up 13.9% of external sales and 3.3% of fixed assets. With FY14 EPS $1.038 and NAV $5.67 per share, KEP trades at 7.8x FY14 P/E and 1.43x P/BV. Both Keppel Corp and Keppel Land are halted pending announcement today. Latest broker ratings: Maybank-KE maintains Hold with TP of $8.60 Credit Suisse maintains Outperform with TP of $12.50 Barclays maintains Overweight with TP of $11.70 BNP maintains Buy with TP of $10.00 CIMB maintains Add with TP of $9.90 UOBKH maintains Neutral with TP of $8.80 JPMorgan maintains Neutral with TP of $8.80 Nomura maintains Reduce with TP of $7.95

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