Keppel Corporation (KEP) has secured new orders worth about S$4.9b YTD, close to our original forecast of S$5b. With good order momentum that is supported by prospects in the O&M sector, we increase our new order win forecast to S$6b for this year, while keeping our S$6.75b target for FY14F unchanged for now. KEP also recently announced that it will jointly develop, own and operate a yard facility in Mexico, in line with its “Near Market, Near Customer” strategy that we have always believed will put it in good stead to win new orders, especially with increasing focus on local content requirements. Besides more orders expected from Mexico, we also look to other growth areas such as West Africa, the Caspian Sea and the Gulf of Mexico. Our SOTP-based fair value estimate rises from S$12.53 to S$12.87; maintain BUY.
Good order win momentum; raising forecast
Keppel Corporation (KEP) has secured new orders worth about S$4.9b YTD, close to our original forecast of S$5b. With good order momentum that is supported by prospects in the O&M sector, we increase our new order win forecast to S$6b for this year, while keeping our S$6.75b target for FY14F unchanged for now.
New developments support positive view
KEP also recently announced that it will jointly develop, own and operate a yard facility in Mexico, in line with its “Near Market, Near Customer” strategy that we have always believed will put it in good stead to win new orders, especially with increasing focus on local content requirements. The first phase of this yard, costing US$150m, is to support the construction of six KFELS B Class jackup rigs for PEMEX, Mexico’s national oil company. Total yard development cost is about US$400m.
Signs have been pointing to Mexico
After a long period of oil production decline due to under-investment, Mexico finally opened its doors to foreign investors when its President proposed allowing PEMEX to enter into JVs, and for private oil companies to enter into profit-sharing agreements with the government. As mentioned in our earlier reports, the realization that PEMEX cannot develop the country’s resources meaningfully alone will lead to more opportunities for foreign industry players, including KEP. Earlier this year, PEMEX unveiled investment plans of US$25.3b for 2013, of which US$20b is targeted at upstream activities.
Raising FV to S$12.87
Besides more orders expected from Mexico, we also look to other growth areas such as West Africa, the Caspian Sea and the Gulf of Mexico. With the better-than-expected order flow YTD and good prospects in the O&M sector, we increase our new order estimate for this year from S$5b to S$6b, resulting in an increase in our SOTP-based fair value estimate from S$12.53 to S$12.87. Maintain BUY
Keppel Corporation (KEP) has secured new orders worth about S$4.9b YTD, close to our original forecast of S$5b. With good order momentum that is supported by prospects in the O&M sector, we increase our new order win forecast to S$6b for this year, while keeping our S$6.75b target for FY14F unchanged for now.
New developments support positive view
KEP also recently announced that it will jointly develop, own and operate a yard facility in Mexico, in line with its “Near Market, Near Customer” strategy that we have always believed will put it in good stead to win new orders, especially with increasing focus on local content requirements. The first phase of this yard, costing US$150m, is to support the construction of six KFELS B Class jackup rigs for PEMEX, Mexico’s national oil company. Total yard development cost is about US$400m.
Signs have been pointing to Mexico
After a long period of oil production decline due to under-investment, Mexico finally opened its doors to foreign investors when its President proposed allowing PEMEX to enter into JVs, and for private oil companies to enter into profit-sharing agreements with the government. As mentioned in our earlier reports, the realization that PEMEX cannot develop the country’s resources meaningfully alone will lead to more opportunities for foreign industry players, including KEP. Earlier this year, PEMEX unveiled investment plans of US$25.3b for 2013, of which US$20b is targeted at upstream activities.
Raising FV to S$12.87
Besides more orders expected from Mexico, we also look to other growth areas such as West Africa, the Caspian Sea and the Gulf of Mexico. With the better-than-expected order flow YTD and good prospects in the O&M sector, we increase our new order estimate for this year from S$5b to S$6b, resulting in an increase in our SOTP-based fair value estimate from S$12.53 to S$12.87. Maintain BUY
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