- Excluding one-offs, FY14 results missed. 4Q14 O&M operating margins down 1.8ppts QoQ to 13.2%. Trim FY16E EPS by 3%.
- Stock on trading halt, watch for corporate actions.
- Maintain HOLD. Lower SOTP-based TP to SGD8.60 from SGD9.00. Support from final DPS of 36 cts for a full-year 48 cts or 5.9% yields.
Adjusting for SGD436m in one-off gains, FY14 PATMI of SGD1,449m (+2.6% YoY) missed expectations, at 94%/95% of our/consensus forecasts. Unexpectedly, 4Q14 O&M margins dipped 1.8ppts to 13.2% (3Q14: 15.0%, 4Q13: 14.2%), suggesting weaker execution.
Property was weighed down by soft Singapore sales although sales in China were modestly higher in 4Q. If not for the one-offs, overall performance would have been uninspiring.
Challenging times; watch for corporate actions
O&M secured in-line orders of SGD5.5b in FY14, bringing its net order book to SGD12.5b, down from record of SGD14.2b in FY13. We further lower our win assumptions for FY15E/16E to SGD4.2b/3.8b, from SGD4.4b/4.2b. This is to reflect a further deterioration in the offshore rig market. Property markets remain insipid while infrastructure faces electricity-market competition. Keppel’s diversification should help it tide over the challenging times.
Maintain HOLD with yield support. Our SOTP-based TP drops to SGD8.60 from SGD9.00 mainly on marginally lower O&M valuation following our cuts in order win assumptions. FY16E EPS is cut by 3% and we also introduce FY17E forecasts. Things which could change our mind are: 1) positive corporate developments; 2) improved drilling dynamics triggering a new rig-ordering cycle; 3) higher
O&M margins; and 4) a property-sector revival.
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