SINGAPORE (July 21): OCBC Investment Research is maintaining its “buy” call on Keppel Corporation with a $7.36 fair value estimate even as the group on Thursday reported a 22.1% decline in profit for quarter ended June.
See: Keppel Corp 2Q earnings sink 22% to $160.3 mil on lower offshore & marine contributions
In a Friday report, lead analyst Low Pei Han notes healthy profits from other core segments of Keppel Corp, with its offshore and marine (O&M) division remaining in the black this quarter.
While profit from O&M was only $1.4 million compared to $61.4 million a year ago, this segment barely broke even in the previous quarter, she recalls.
“Rightsizing efforts helped to achieve an operating profit of $36 million, but this was not sufficient to cover higher financing costs for the enlarged working capital. Contributions from associates helped the division to break even. The delivery of two semisubmersibles will be moved from 2019 to 2020 (projects are cashflow neutral and compensation will be given to KEP), while the liftboat for Crystal Heights will be deferred from 2018 to 2019,” says Low.
The analyst adds that Keppel Corp’s interim dividend of 8 cents per share exceeded OCBC’s expectations, as this was the same amount declared in 1H16.
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“Looking ahead, Keppel Corp expects to recognise profits from about 5,860 of overseas homes sold as they are progressively completed from 3Q17 through to 2019. In Singapore, management sees the market bottoming with better prospects ahead,” she adds.
“As for its asset management business which is seeing good demand from investors for investments in assets such as data centres, KEP has ambitious internal targets. Indeed, Keppel Capital aims to double its $25 billion assets under management (AUM) over the next five years.”
As at 9.32am, shares in Keppel Corp are down by 6 cents at $6.47.
