Keppel Corporation (KEP) reported a 11.7% YoY decrease in revenue to S$3.08b and a 33.4% drop in net profit to S$346.8m in 2Q13. However, excluding the lumpy profits from the sale of Reflections at Keppel Bay and the one-time gain from sale of investment shares, net profit in 1H13 was in line with last year’s results, within our expectations. Operating margin in the O&M segment continued to hold up. The group CEO as well as the CEO of Keppel O&M will be retiring early next year and successors have been identified. An interim cash dividend and in-specie distribution of Keppel REIT units brings the total interim distribution to S$0.208/share. Maintain BUY with a slightly lower fair value estimate of S$12.53 (prev. S$12.68).
Steady 1H13 results, ex Reflections and other gains
Keppel Corporation (KEP) reported a 11.7% YoY decrease in revenue to S$3.08b and a 33.4% drop in net profit to S$346.8m in 2Q13. However, excluding the lumpy profits from the sale of Reflections at Keppel Bay and the one-time gain from sale of investment shares, net profit in 1H13 was in line with last year’s results. Results were also within our expectations, with top-line and bottom-line forming about 45% of our full year estimates.
O&M performing well, order flow is also good
Operating margin in the O&M segment continued to hold up at 14.2% in 2Q13, similar to 1Q13’s 14.1% and higher than 2Q12’s 13.2%. Order flow YTD has also been good, with KEP securing about S$3.5b new orders so far, accounting for about 70% of our full year estimate. The net order book stood at a healthy level of S$13.1b as at end Jun 2013, same as Mar 2013.
Generous dividends
KEP has declared an interim cash dividend of S$0.10/share, as well as an in-specie distribution of largely all the remaining Keppel REIT units in its books at a ratio of eight Keppel REIT units for every 100 Keppel Corp shares. Together with the interim cash dividend, the total distribution will amount to S$0.208/share, based on Keppel REIT’s close of S$1.35.
CEO to retire in Jan 2014
It was announced that the group CEO would retire in Jan 2014, and the successor would be the current CFO. Meanwhile, the CEO of Keppel O&M will also retire in Feb 2014 and be succeeded by the current COO of Keppel O&M.
Fair value drops slightly
With the better-than-expected order flow YTD and good prospects in the O&M sector, we increase our peg for the segment from 14x to 15x, a tad higher than mid-cycle valuations. But with the lower fair value estimate for Keppel Land by our property analyst and the expected divestment of Keppel REIT units, our fair value estimate for KEP falls slightly from S$12.68 to S$12.53. Maintain BUY.
Keppel Corporation (KEP) reported a 11.7% YoY decrease in revenue to S$3.08b and a 33.4% drop in net profit to S$346.8m in 2Q13. However, excluding the lumpy profits from the sale of Reflections at Keppel Bay and the one-time gain from sale of investment shares, net profit in 1H13 was in line with last year’s results. Results were also within our expectations, with top-line and bottom-line forming about 45% of our full year estimates.
O&M performing well, order flow is also good
Operating margin in the O&M segment continued to hold up at 14.2% in 2Q13, similar to 1Q13’s 14.1% and higher than 2Q12’s 13.2%. Order flow YTD has also been good, with KEP securing about S$3.5b new orders so far, accounting for about 70% of our full year estimate. The net order book stood at a healthy level of S$13.1b as at end Jun 2013, same as Mar 2013.
Generous dividends
KEP has declared an interim cash dividend of S$0.10/share, as well as an in-specie distribution of largely all the remaining Keppel REIT units in its books at a ratio of eight Keppel REIT units for every 100 Keppel Corp shares. Together with the interim cash dividend, the total distribution will amount to S$0.208/share, based on Keppel REIT’s close of S$1.35.
CEO to retire in Jan 2014
It was announced that the group CEO would retire in Jan 2014, and the successor would be the current CFO. Meanwhile, the CEO of Keppel O&M will also retire in Feb 2014 and be succeeded by the current COO of Keppel O&M.
Fair value drops slightly
With the better-than-expected order flow YTD and good prospects in the O&M sector, we increase our peg for the segment from 14x to 15x, a tad higher than mid-cycle valuations. But with the lower fair value estimate for Keppel Land by our property analyst and the expected divestment of Keppel REIT units, our fair value estimate for KEP falls slightly from S$12.68 to S$12.53. Maintain BUY.
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