Keppel Corporation (KEP) reported a 8.4% YoY fall in revenue to S$2.95b but saw a 32.1% increase in net profit to S$457.6m in 3Q13, such that 9M13 net profit accounted for 77% of our full year estimates. Stripping out one-off items, we estimate recurring net profit at S$396m, in line with expectations. Operating margin in the O&M segment was strong at 16.5% in 3Q13, much higher than 2Q13’s 14.2%. Order flow YTD has also been healthy, with KEP securing about S$5b new orders so far vs our full year estimate of S$6b. The net order book stood at a record S$13.6b as at end Sep. We continue to see good prospects in the O&M sector with the healthy rig demand, and expect the group to continue with its Near Market, Near Customer strategy. Maintain BUY with S$12.87 fair value estimate.
3Q13 results in line
Keppel Corporation (KEP) reported a 8.4% YoY fall in revenue to S$2.95b but saw a 32.1% increase in net profit to S$457.6m in 3Q13, such that 9M13 net profit accounted for 77% of our full year estimates. Stripping out a S$61m profit on disposal of subsidiaries (gain from divestment of Keppel REIT accounted for slightly less than S$50m), we estimate recurring net profit at S$396m, in line with expectations. Revenue from the O&M division dipped 31% to S$1.54b with the lower volume of work, while turnover from the infrastructure segment rose 29% to S$877m with the co-gen power plant expansion in Singapore. Revenue from the property division rose by S$226m to S$532m, as more homes were sold in China in 3Q13.
Strong O&M operating margin, order flow good
Operating margin in the O&M segment was strong at 16.5% in 3Q13, much higher than 2Q13’s 14.2% and 3Q12’s 12.9%. This was attributed to more deliveries of the KFELS B Class rig, a product that KEP is familiar with repeat executions. The group also saw a few repair projects in the quarter that had higher margins. Order flow YTD has been healthy, with KEP securing about S$5b new orders so far vs our full year estimate of S$6b. The net order book stood at a record S$13.6b as at end Sep, compared to S$13.1b as at end Jun 2013.
Updates on certain key projects
Construction for the first semi-submersible rig for Sete Brasil is on track; it is expected to leave Singapore early next year and arrive at Brazil around Feb 2014. Revenue recognition for this unit is currently between 20-50%. In infrastructure, the Doha project is close to completion, and management hopes to get it up and running by mid 2014; no provisions were taken in 3Q13.
Still upbeat on O&M sector
We continue to see good prospects in the O&M sector with the healthy rig demand, and expect the group to continue with its Near Market, Near Customer strategy as seen from its recent inauguration of the Baku Shipyard in Azerbaijan and the MOU with PEMEX to develop a new yard in Mexico. Maintain BUY with S$12.87 fair value estimate.
Keppel Corporation (KEP) reported a 8.4% YoY fall in revenue to S$2.95b but saw a 32.1% increase in net profit to S$457.6m in 3Q13, such that 9M13 net profit accounted for 77% of our full year estimates. Stripping out a S$61m profit on disposal of subsidiaries (gain from divestment of Keppel REIT accounted for slightly less than S$50m), we estimate recurring net profit at S$396m, in line with expectations. Revenue from the O&M division dipped 31% to S$1.54b with the lower volume of work, while turnover from the infrastructure segment rose 29% to S$877m with the co-gen power plant expansion in Singapore. Revenue from the property division rose by S$226m to S$532m, as more homes were sold in China in 3Q13.
Strong O&M operating margin, order flow good
Operating margin in the O&M segment was strong at 16.5% in 3Q13, much higher than 2Q13’s 14.2% and 3Q12’s 12.9%. This was attributed to more deliveries of the KFELS B Class rig, a product that KEP is familiar with repeat executions. The group also saw a few repair projects in the quarter that had higher margins. Order flow YTD has been healthy, with KEP securing about S$5b new orders so far vs our full year estimate of S$6b. The net order book stood at a record S$13.6b as at end Sep, compared to S$13.1b as at end Jun 2013.
Updates on certain key projects
Construction for the first semi-submersible rig for Sete Brasil is on track; it is expected to leave Singapore early next year and arrive at Brazil around Feb 2014. Revenue recognition for this unit is currently between 20-50%. In infrastructure, the Doha project is close to completion, and management hopes to get it up and running by mid 2014; no provisions were taken in 3Q13.
Still upbeat on O&M sector
We continue to see good prospects in the O&M sector with the healthy rig demand, and expect the group to continue with its Near Market, Near Customer strategy as seen from its recent inauguration of the Baku Shipyard in Azerbaijan and the MOU with PEMEX to develop a new yard in Mexico. Maintain BUY with S$12.87 fair value estimate.
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