Keppel Corp

Keppel Corp: 3Q12 results ahead of expectations. Net profit was $346.4m, -15% yoy despite the rise in sales to $3.2b, +19% yoy. Earnings came in ahead of Street estimates, on stronger-than-expected bookings on its O&M and property divisions. The 3Q12 decline in profits was attributable to lower margins in the O&M segment, as EBIT margin dropped to 12.9% in 3Q12 (guidance of 12-15%), vs a record 26% in 3Q11. The group continues to recognize profits from contracts secured in the 4Q10-2011 period, characterized by a tough competitive environment. O&M continues to be the largest contributor to profits with a 64% share of 3Q12 pretax profit. KEP won new orders worth $8.8b in 9M12. Net order book stands at $13.1b, up 39% from the Dec ’11 total of $9.4b, with deliveries extending into 2019. The property segment reported another strong quarter with revenue of $305m and net profit of $119m, meeting CLSA’s full year forecasts. The house expects 4Q to be reasonably strong driven by sales at “Reflections”, “Luxurie” and “Marine Bay Suites” projects. The Street continues to be bullish on the stock. Nomura, Citi maintain Buy with TP $13.80, and $13.10 respectively. Deutsche maintains Buy, but lowers TP to $13.50 from $13.70. CLSA maintains at Outperform, keeps TP at $12.90. UOBK maintains Buy, on a lowered TP of $12.80 (from $13.00).