Keppel Corporation (KEP) reported a 38.5% increase in revenue to S$13.96b and a 15.0% rise in net profit to S$2.24b in FY12. Excluding revaluations gains from the property segment, the group turned in net profit of S$1.9b, in line with our expectations. Operating margin in the O&M segment also remained stable at 12.9% in 4Q12. The group’s O&M net order book stood at S$12.8b as at end Dec. Looking ahead, we are expecting new order wins of about S$5b in 2013. Meanwhile, KEP has proposed a distribution of 72.4 S cents/share for the year; this includes a dividend in specie of Keppel REIT units. After incorporating a higher fair value estimate of S$4.53 for Keppel Land and the proposed dividend in specie, our fair value estimate rises slightly from S$12.49 to S$12.68. Maintain BUY.
FY12 results in line with expectations
Keppel Corporation (KEP) reported a 38.5% increase in revenue to S$13.96b and a 15.0% rise in net profit to S$2.24b in FY12. Excluding revaluations gains from the property segment, the group turned in net profit of S$1.9b, in line with our expectations. Revenue from the O&M division was 40% higher due to higher volume of work, while turnover from the infrastructure division was flattish. Revenue grew the most in the property division with a 106% jump, but this was due to lumpy contributions from Reflections at Keppel Bay which will not be repeated in FY13.
O&M operating margin remains stable
Operating margin in the O&M segment was stable at 12.9% in 4Q12, similar to 3Q12 but expectedly lower than 4Q11’s 21.0%. Management is guiding margins of 10-12%, though we believe that there is room for productivity and efficiency gains which may result in better-than-expected margins.
Regional yards garnering confidence of established customers
As mentioned in our earlier reports, KEP has started to improve the competencies and productivity of its regional satellite yards so that more work can be outsourced to them in the future to free up space in the Singapore yards. Results are starting to show – the Philippines yard recently won a contract from Shell to build a depletion compression platform, adding to its growing offshore track record.
Proposed dividend in specie of Keppel REIT units
The group’s O&M net order book stood at S$12.8b as at end Dec. Looking ahead, we are expecting new order wins of about S$5b in 2013. Meanwhile, KEP has proposed a distribution of 72.4 S cents/share for the year; this includes a dividend in specie of Keppel REIT units. After incorporating a higher fair value estimate of S$4.53 for Keppel Land from our property analyst and the proposed dividend specie of Keppel REIT units, our fair value estimate rises slightly from S$12.49 to S$12.68. Maintain BUY.
Keppel Corporation (KEP) reported a 38.5% increase in revenue to S$13.96b and a 15.0% rise in net profit to S$2.24b in FY12. Excluding revaluations gains from the property segment, the group turned in net profit of S$1.9b, in line with our expectations. Revenue from the O&M division was 40% higher due to higher volume of work, while turnover from the infrastructure division was flattish. Revenue grew the most in the property division with a 106% jump, but this was due to lumpy contributions from Reflections at Keppel Bay which will not be repeated in FY13.
O&M operating margin remains stable
Operating margin in the O&M segment was stable at 12.9% in 4Q12, similar to 3Q12 but expectedly lower than 4Q11’s 21.0%. Management is guiding margins of 10-12%, though we believe that there is room for productivity and efficiency gains which may result in better-than-expected margins.
Regional yards garnering confidence of established customers
As mentioned in our earlier reports, KEP has started to improve the competencies and productivity of its regional satellite yards so that more work can be outsourced to them in the future to free up space in the Singapore yards. Results are starting to show – the Philippines yard recently won a contract from Shell to build a depletion compression platform, adding to its growing offshore track record.
Proposed dividend in specie of Keppel REIT units
The group’s O&M net order book stood at S$12.8b as at end Dec. Looking ahead, we are expecting new order wins of about S$5b in 2013. Meanwhile, KEP has proposed a distribution of 72.4 S cents/share for the year; this includes a dividend in specie of Keppel REIT units. After incorporating a higher fair value estimate of S$4.53 for Keppel Land from our property analyst and the proposed dividend specie of Keppel REIT units, our fair value estimate rises slightly from S$12.49 to S$12.68. Maintain BUY.
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