Keppel Corp

Keppel Corp: 2Q11 results ahead of expectations.
Net profit of $385m, +9% yoy, +24% qoq, and came in 12% higher than consensus estimates.
O&M profits at $609m (+7% yoy, +10% qoq) and stronger infrastructure contribution at $81m (3-fold increase yoy, +12% qoq), helped to negate the decline in property profit of $225m (-34% yoy, -55% qoq).

The weakness in property was due to a change in accounting rules, where revenue recognition for its overseas and local deferred payment scheme projects are now delayed till “completion of construction” rather than on “percentage of completion”. Keppel also restated its 1Q11 property earnings downward by ~$38m, although this sum will now be recognized in subsequent yrs, ie. on completion.

The Street remains bullish on the O&M industry, supported by the level of current and planned E&P, and replacement of ageing offshore rig fleet and existing eqpt infrastructure. Expect 2011 to be a banner yr of O&M orders for Keppel, as its YTD wins of $7.4b have already reached the previous peak set in 2007.
Co. declares better-than-expected interim div of 17cts/ sh, up from last yr’s split adjusted div of 14.5cts.

Deutsche maintains at Buy, raises TP to $13.80 from $13.60.
Daiwa, HSBC, CIMB maintain Outperform, with TP btwn $13.45 – 14.10.