Kepcorp: Trading near historical lows but lacks catalyst
Cheryl (UBS) reckons the recent slump in KEP is due to potential losses in its 4Q15 results (21st Jan). At current levels, she finds valuations attractive but catalysts are missing.
· Reasons for correction.
1) Slump in oil prices could jeopardise order book
b) Sete Brasil may file for bankruptcy.
3) 4Q15 results (21st Jan) may see losses due to provisions for receivables, reversal of prior profits and write down of investments.
· Fund raising risk? From 11% in 4Q14, gearing has surged to 52% by 3Q15. Cheryl thinks KEP does not need to do raise funds but dividends (45-50% payout) may be cut.
· Valuation attractive. KEP now trades below its NAV of S$5.91. Cheryl estimates that market is attributing just S$1.44 for its Offshore business.
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