Keppel Corporation (KEP) reported a 19.1% YoY rise in revenue to S$3.2b but saw a 14.7% drop in net profit to S$346.4m in 3Q12, such that 9M12 net profit accounted for 87% and 88% of ours and the street’s full year estimates, respectively. This has been a front-end loaded year as lumpy earnings from the property division boosted net profit in 1H12. O&M margins continued to normalize to 12.9% in 3Q12 but this was still slightly above our expectations. Meanwhile KEP has started to improve the competencies and productivity of its regional satellite yards to meet heavier workload requirements, which we think is a good strategy. After securing S$8.8b of orders in 9M12 (5% higher than in 9M11), the group’s net order book stood at S$13.1b as at end Sep with deliveries extending to 2019. Maintain BUY with S$13.34 fair value estimate.
Steady execution; results slightly above
Keppel Corporation (KEP) reported a 19.1% YoY rise in revenue to S$3.2b but saw a 14.7% drop in net profit to S$346.4m in 3Q12, such that 9M12 net profit accounted for 87% and 88% of ours and the street’s full year estimates, respectively. This has been a front-end loaded year as lumpy earnings from the property division boosted net profit in 1H12. Property turned in net profit of S$70.7m in 3Q12 vs S$568.8m in 1H12; we understand that fewer than 10 units of the Reflections at Keppel Bay project were recognized in 3Q12. Net profit from the O&M segment remained relatively stable at S$241.2m in 3Q12 compared to S$248.8m in 2Q12.
O&M margins continue to normalize
Operating margin in the O&M division has more than halved from 26.0% in 3Q11 to 12.9% in 3Q12 as margins continue to normalize. Recall that margins were impressive around the 20+% range from 4Q10 to 4Q11 as high profit margin contracts, secured largely before the crisis, were executed, along with productivity gains. This trend is still slightly above our expectations as we were expecting margins of around 11-12%.
Improving regional satellite yards
Meanwhile KEP has started to improve the competencies and productivity of its regional satellite yards to meet heavier workload requirements. Increased focus will be placed on productivity and R&D efforts to sustain growth for the future. This is a good strategy to pursue so that more work can be outsourced to regional yards in the future to free up space in the Singapore yards.
Maintain BUY
After securing S$8.8b of orders in 9M12 (5% higher than in 9M11), the group’s net order book stood at S$13.1b as at end Sep with deliveries extending to 2019. KEP remains optimistic about the industry’s prospects, and management mentioned that enquiries for offshore orders are still healthy across all the main product classes. Maintain BUY with S$13.34 fair value estimate.
Keppel Corporation (KEP) reported a 19.1% YoY rise in revenue to S$3.2b but saw a 14.7% drop in net profit to S$346.4m in 3Q12, such that 9M12 net profit accounted for 87% and 88% of ours and the street’s full year estimates, respectively. This has been a front-end loaded year as lumpy earnings from the property division boosted net profit in 1H12. Property turned in net profit of S$70.7m in 3Q12 vs S$568.8m in 1H12; we understand that fewer than 10 units of the Reflections at Keppel Bay project were recognized in 3Q12. Net profit from the O&M segment remained relatively stable at S$241.2m in 3Q12 compared to S$248.8m in 2Q12.
O&M margins continue to normalize
Operating margin in the O&M division has more than halved from 26.0% in 3Q11 to 12.9% in 3Q12 as margins continue to normalize. Recall that margins were impressive around the 20+% range from 4Q10 to 4Q11 as high profit margin contracts, secured largely before the crisis, were executed, along with productivity gains. This trend is still slightly above our expectations as we were expecting margins of around 11-12%.
Improving regional satellite yards
Meanwhile KEP has started to improve the competencies and productivity of its regional satellite yards to meet heavier workload requirements. Increased focus will be placed on productivity and R&D efforts to sustain growth for the future. This is a good strategy to pursue so that more work can be outsourced to regional yards in the future to free up space in the Singapore yards.
Maintain BUY
After securing S$8.8b of orders in 9M12 (5% higher than in 9M11), the group’s net order book stood at S$13.1b as at end Sep with deliveries extending to 2019. KEP remains optimistic about the industry’s prospects, and management mentioned that enquiries for offshore orders are still healthy across all the main product classes. Maintain BUY with S$13.34 fair value estimate.
No comments:
Post a Comment