Keppel Corp

Keppel Corp: has signed a MOU with Mexico’s national oil company, PEMEX to jointly develop, own and operate a yard in Mexico. The yard will be located in the modern Port of Altamira along the coast of the Gulf of Mexico and will be developed in phases. The first phase development devt is about 35ha in size with estimated cost of US$150m. Total devt cost is ~US$400m. The first phase would be used to support the construction of 6 KFELS B class jackup rigs to be operating for PEMEX. Estimated at US$1.2b, UOBK expects these rig orders to kick start Keppel’s 2014 contract wins. PEMEX intends to arrest Mexico’s declining hydrocarbon pdtn with huge invmt plans targeted at upstream activities. In Feb, it unveiled plans to invest US$25.3b in 2013, of which US$20b is earmarked for upstream activities. Maybank KE believes that PEMEX may need up to 60 jackup rigs over the next 5 yrs. The joint establishment of the yard demonstrates PEMEX’s commitment to its oil and gas program, and gives Keppel higher chances of securing contracts not just from PEMEX but also better accessibility to the markets in the Golden Triangle (Gulf of Mexico, Brazil, West Africa). Market watchers like Keppel’s latest near-market, near-customer strategy to tap customer demand for localization of rig construction and to stay ahead of competition. Believe that it is a quality name to own. Maybank KE keeps its Buy call with TP $12.12. UOBK maintains Buy with TP $13.50. Credit Suisse maintains Outperform with TP $12.50. CIMB maintains Outperform with TP $12.10.