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Keppel’s shift of focus to platforms and vessels a wise move

Samantha Chiew
Samantha Chiew • 2 min read
Keppel’s shift of focus to platforms and vessels a wise move
SINGAPORE (May 30): RHB is maintaining its “buy” call on Keppel Corp with an SOP-based target price of $7.55 as it continues to favour the conglomerate’s mix of income, derived from recurring net profit and earnings from specific projects.
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SINGAPORE (May 30): RHB is maintaining its “buy” call on Keppel Corp with an SOP-based target price of $7.55 as it continues to favour the conglomerate’s mix of income, derived from recurring net profit and earnings from specific projects.

Keppel’s offshore & marine (O&M) unit looks set to close 1H ending June on a stable footing, says RHB in a Tuesday report. Year to date, it has acquired three contracts worth $263 million, including contracts for tension leg wellhead platforms in April and dredging vessels and LNG carrier vessels in May.

RHB estimates O&M’s current orderbook to stand at $3.7 billion presently. “We expect it to win about $500 million in contracts this year,” says RHB.

Keppel is also focusing on expanding its stable recurring income from its property, infrastructure and investment divisions, says RHB. These sources of income would complement the earnings that are based on projects in its O&M unit. In FY16, 40% of Keppel’s net profit came from a recurring base.

With outlook of the oil and gas market improving, RHB expects numbers from Keppel’s O&M segment to increase, as soon as development capex starts to trickle in soon.

Although the O&M unit’s outlook is expected to stay soft over the near term, RHB believes that Keppel focusing on its non-drilling solutions and specialised vessels is a wise move, as proven by its contract wins.

See also: SAC Capital initiates ‘buy’ on Sanli Environmental after $105.3 mil contract win from PUB

Shares of Keppel are trading at $6.48.

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