Keppel Corporation (KEP) reported a 10.3% increase in revenue to S$10.1b and a 21.8% rise in net profit to S$1.84b in FY11. Excluding exceptional items comprising mainly of fair value gains on investment properties, core net profit rose 14.1% to S$1.49b, which was 1.4% and 4.1% above ours and the street’s expectations, respectively. The offshore marine division remained the largest contributor to net profit with a 71% share. Though the group’s remaining jack-up options have lapsed, management remains upbeat on the outlook of the offshore market. In line with our expectations, a final dividend of S$0.26/share has been recommended. Maintain BUY with S$12.27 fair value estimate (prev. S$12.02).
FY11 results in line with expectations. Keppel Corporation (KEP) reported a 10.3% increase in revenue to S$10.1b and a 21.8% rise in net profit to S$1.84b in FY11. Excluding exceptional items comprising mainly of fair value gains on investment properties, core net profit rose 14.1% to S$1.49b, which was 1.4% and 4.1% above ours and the street’s expectations, respectively (Bloomberg consensus: S$1.43b).
Offshore marine still the main driver of earnings. The offshore marine division remained the largest contributor to net profit with a 71% share. Property accounted for 20%, infrastructure at 6% and investments at 3%. In infrastructure, the group made provisions for its projects in Qatar; we understand that it is still in the process of finalizing the schedule of certain work with customers.
Cautiously optimistic on the offshore market.KEP’s remaining jack-up options have lapsed, which is not surprising as customers preferred to stay on the sidelines with heightened concerns about the Eurozone and other economies in the later part of last year. Moreover, the options have higher prices tied to them, and it is likely that only customers with ready charters and adequate financing would want to exercise the options during periods of uncertainty. Still, management remains upbeat about the offshore market, as major oil companies have announced increased budgets for exploration and production, while day rates have also been strengthening for certain rigs.
Maintain BUY.After securing S$9.8b worth of new orders in FY11, our new order target for FY12 is S$5b, excluding Petrobras’ orders. In Brazil, KEP is also moving to build offshore support vessels in anticipation of demand. In line with our expectations, a final dividend of S$0.26/share has been recommended besides an earlier interim dividend of S$0.17/share that has been paid. After updating the market value of the group’s listed entities, as well as the change in Keppel Land’s fair value by our property analyst, our fair value estimate for KEP rises from S$12.02 to S$12.27. Maintain BUY.
Offshore marine still the main driver of earnings. The offshore marine division remained the largest contributor to net profit with a 71% share. Property accounted for 20%, infrastructure at 6% and investments at 3%. In infrastructure, the group made provisions for its projects in Qatar; we understand that it is still in the process of finalizing the schedule of certain work with customers.
Cautiously optimistic on the offshore market.KEP’s remaining jack-up options have lapsed, which is not surprising as customers preferred to stay on the sidelines with heightened concerns about the Eurozone and other economies in the later part of last year. Moreover, the options have higher prices tied to them, and it is likely that only customers with ready charters and adequate financing would want to exercise the options during periods of uncertainty. Still, management remains upbeat about the offshore market, as major oil companies have announced increased budgets for exploration and production, while day rates have also been strengthening for certain rigs.
Maintain BUY.After securing S$9.8b worth of new orders in FY11, our new order target for FY12 is S$5b, excluding Petrobras’ orders. In Brazil, KEP is also moving to build offshore support vessels in anticipation of demand. In line with our expectations, a final dividend of S$0.26/share has been recommended besides an earlier interim dividend of S$0.17/share that has been paid. After updating the market value of the group’s listed entities, as well as the change in Keppel Land’s fair value by our property analyst, our fair value estimate for KEP rises from S$12.02 to S$12.27. Maintain BUY.
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