Keppel T&T profit disappoints, but stock still set for upside: UOB KayHian

Keppel Telecommunications & Transportation posted first-quarter net profit below expectations, with the company “still turning the corner,” UOB KayHian said in a note on Wednesday.

It noted first-quarter net profit of S$9.4 million was 18 percent of its full-year estimate.

“Both the logistics and data centre segments remained weak, with the former swinging into a loss owing to initial set-up costs for UrbanFox. Higher staff costs to support new business developments continued to mar results,” the brokerage said. it cut its 2018-19 earnings forecasts by 6-10 percent.

But UOB KayHian said it still expected upside to come from the data center segment, saying demand remains “hot.”

“We believe that with KPTT hiring new engineers, a mega project is likely coming for its data centre division,” it said. “We remain confident that a mega project is on the verge of being unveiled and urge investors to await the good news that will come soon.”

It cut its target price to S$1.75 from S$1.90 on the earnings forecast cut and a lower target for M1. It kept a Buy call.

The stock was down 0.64 percent at S$1.56 at 14:03 SGT on Wednesday. Buy orders are clustered around S$1.55, suggesting a support, while sell orders at S$1.56 and S$1.57 indicate a cap on any recovery. The recent low of S$1.52 may offer additional support.