Meanwhile, Keppel Corporation proposed to gain control of M1, which could cost up to $1.28 billion, to transform the group into a hybrid cloud giant in the longer term.
In a Friday report, analyst Lim Siew Khee says, “We expect q-o-q declines in 3Q18 earnings for Singapore conglomerates/O&M names, except for stronger marine and electronics (ST Engineering).”
The research house has a “add” call on Keppel with a target price of $8.82.
“We estimate Keppel’s 3Q18 net profit at about $277 million (-9% q-o-q, -5% y-o-y), mainly due to the absence of one-off gains of $60 million (dilution of Keppel DC REIT placement and net fair value gain from Nassim Woods redevelopment). We expect gains of $114 million from the completion of Beijing Aether’s divestment,” says Lim.
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Keppel’s investment division likely turned around with the Tianjin land sale, but the O&M sector is expected to still be in a loss in 3Q18.
CGS-CIMB has an “add” rating on Sembcorp, with a target price of $$3.49, and estimating that the group’s 3Q18 net profit will come up to approximately $78 million (-5% q-o-q, -14% y-o-y), mainly due to fewer lumpy land sales in urban development.
Utilities India should turn in lower q-o-q profit of $25 million (3Q18: $39 million) with the absence of cost recovery but sustained strong renewables and spot power prices.
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Meanwhile, SGPL could still expect to see a loss of about $5 million, compared to a $3 million loss last quarter, as 3Q18 average spot price was 8% lower q-o-q. Plant utilisation was also lower for SGPL at around 76%, compared to 91% in 2Q18, but steady for TPCIL at 87% from 88% last quarter. Hyflux Tuaspring bid could be in focus.
“We expect Sembcorp Marine to report narrower losses of $20-25 million for 3Q18F (2Q18: $56 million loss) with the absence of one-off loss of $27 million from the completion of West Rigel sale,“ says Lim.
On the other hand, ST Engineering is also kept at “add” with a target price of $3.80 by the research house. The group is estimated to deliver 3Q18 net profit of $140 million, 19% higher q-o-q and 9% higher y-o-y.
“Marine was likely the key driver with stronger ship repair as its US yard started to gain traction in rig repair in the US. Conro (container roll on – roll off) provision was likely minimal. Aerospace could report 18% q-o-q decline in profits due to the absence of $9 million divestment gain from Airbus Helicopter. Focus likely to be MRAS acquisition status and production ramp-up potential,” says Lim.
Meanwhile, the analyst estimates Yangzijiang Shipbuilding’s 3Q18 net profit to come up to RMB700 million ($140.8 million), a 30% drop q-o-q and 20% decrease y-o-y, with less than 10 vessels being delivered and shipbuilding gross margins of 16.5%, compared to 21% last quarter.
As at 11.35am, shares in Keppel, Sembcorp and ST Engineering are trading at $7.15, $3.00 and $3.50, respectively.
