Keppel Corporation (KEP) reported a set of disappointing FY13 results last night, with core earnings falling 26% to S$1.41b, or around 7% below ours and the street’s forecast; this mainly due to larger-than-expected provisions for its Infrastructure business. Going forward, KEP maintains a fairly cautiously upbeat outlook, especially for its main O&M business. We also believe that KEP should just stay ahead of the pack with its Near Market, Near Customer strategy. Maintain BUY with a slightly lower SOTP-based fair value of S$12.25 (versus S$12.87) due to lower market values of its listed units.
FY13 earnings 7% below forecast
Keppel Corporation (KEP) reported a set of disappointing FY13 results last night. Full-year revenue slipped 11% to S$12.38b, mainly due to a sharp 41% fall in its property sales to S$1.77b (absence of revenue recognition from sales of Reflections at Keppel Bay in FY13); but the figure was still just ahead of our forecast of S$11.83b and the street’s S$12.18b estimate. However, due to a larger-than-expected loss (mainly due to prolongation provisions) at its Infrastructure division, reported net profit slipped 18% to S$1.85b. And if we exclude exceptional gains, core earnings would have fallen 26% to S$1.41b, or about 7% below ours and the street’s S$1.51b forecast. KEP has declared a final dividend of S$0.30/share, bringing its full-year payout to S$0.495 (which includes interim dividend of S$0.10 and dividend-in-specie of K-REIT shares worth S$0.095).
Outlook remains cautiously upbeat
Going forward, KEP maintains a fairly cautiously upbeat outlook, especially for its main O&M business. Management notes that the division has won about S$2.1b worth of new orders (including seven jackups and three FPSOs conversion/upgrades in 4Q13), bringing its total order book to S$14.2b and visibility extending into 2019. Citing the positive global energy outlook, KEP expects the global E&P capex to continue to rise, with >US$223b of deepwater investments likely to be made over 2013-2017. As for its Infrastructure business, management notes that it is doing its best to complete those projects in the UK and Qatar, both within the timeline and present cost forecast. KEP is also scaling up the data centre business, and is exploring a data centre business trust.
Maintain BUY with lower S$12.25 fair value
Despite signs of competition increasing in the O&M sector, we believe that KEP should just stay ahead of the pack with its Near Market, Near Customer strategy. Maintain BUY with a slightly lower SOTP-based fair value of S$12.25 (versus S$12.87) due to lower market values of its listed units.
Keppel Corporation (KEP) reported a set of disappointing FY13 results last night. Full-year revenue slipped 11% to S$12.38b, mainly due to a sharp 41% fall in its property sales to S$1.77b (absence of revenue recognition from sales of Reflections at Keppel Bay in FY13); but the figure was still just ahead of our forecast of S$11.83b and the street’s S$12.18b estimate. However, due to a larger-than-expected loss (mainly due to prolongation provisions) at its Infrastructure division, reported net profit slipped 18% to S$1.85b. And if we exclude exceptional gains, core earnings would have fallen 26% to S$1.41b, or about 7% below ours and the street’s S$1.51b forecast. KEP has declared a final dividend of S$0.30/share, bringing its full-year payout to S$0.495 (which includes interim dividend of S$0.10 and dividend-in-specie of K-REIT shares worth S$0.095).
Outlook remains cautiously upbeat
Going forward, KEP maintains a fairly cautiously upbeat outlook, especially for its main O&M business. Management notes that the division has won about S$2.1b worth of new orders (including seven jackups and three FPSOs conversion/upgrades in 4Q13), bringing its total order book to S$14.2b and visibility extending into 2019. Citing the positive global energy outlook, KEP expects the global E&P capex to continue to rise, with >US$223b of deepwater investments likely to be made over 2013-2017. As for its Infrastructure business, management notes that it is doing its best to complete those projects in the UK and Qatar, both within the timeline and present cost forecast. KEP is also scaling up the data centre business, and is exploring a data centre business trust.
Maintain BUY with lower S$12.25 fair value
Despite signs of competition increasing in the O&M sector, we believe that KEP should just stay ahead of the pack with its Near Market, Near Customer strategy. Maintain BUY with a slightly lower SOTP-based fair value of S$12.25 (versus S$12.87) due to lower market values of its listed units.
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