UOBKayhian on 23 Oct 2014
FY14F PE (x): 10.8
FY15F PE (x): 10.9
Results were within our expectation. 3Q14’s O&M operating margin of 14.9% was stable compared with 1Q14’s 14.6% and 2Q14’s 14.7%. Semi-submersible rigs for Sete Brasil are on track. However, ytd total contract wins are lagging behind our S$7b projection. We cut our contract win projections from S$7b p.a. to S$5b p.a. for 2014 and 2015, and S$6b for 2016. We lower our target price to S$12.60 but maintain our BUY call.
Maintain BUY, but cutting our target price from S$13.50 to S$12.60, based on the sumof-the-parts valuation which values Keppel’s O&M business at 15x 2015F PE. Amid lower oil price fears, Sembcorp Industries (BUY/target: S$5.95) – with half of its earnings from its relatively defensive utilities business - is the most defensive large-cap stock in the Singapore offshore & marine space.
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