Credit Suisse: Keppel’s prospects are improving across O&M, Property divisions

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Credit Suisse said there is “increasing confidence” across Keppel’s key divisions, including the money-losing offshore and marine unit.

The conglomerate reported January-to-March net profit rose 34 percent on-year to $337 million on higher contributions from the property division. Credit Suisse said that was around 34 percent of consensus 2018 forecasts, supported by a divestment gain from the stake sale in Keppel China Marina Holdings.

The offshore and marine division posted a net loss of S$23 million for the quarter. The company noted the division has won around S$580 million in new contracts so far this year.

The bank noted the O&M loss narrowed from a S$55 million loss in the fourth quarter, while the improved orderbook should lead to stronger revenue and profit recognition in subsequent quarters.

“Management sees increasing confidence in the O&M business, underpinned by rising oil prices. While it may take time for a sustained recovery across the board, there are pockets of opportunity in niche markets,” Credit Suisse said.

 

The bank also pointed to Keppel’s positive outlook for its property segment.

“In Singapore, positive market sentiment has been strengthening and Keppel intends to capitalise on the improving conditions to launch a project in Serangoon later this year. It will also be redeveloping Keppel Towers and Nassim Woods to add another 500 units to its landbank,” the bank said. “While China sales fell to 190 units in the first quarter of 2018, it has kept 2,400 launch-ready units in 2018, should market recover.”

The bank kept an Outperform call with a S$10.00 target price, saying Keppel is an Asia ex-Japan Focus list stock.

“In our view, there is dividend upside with more active capital recycling, and we expect a dividend yield of 5.0 percent in 2018 with our
EPS forecast which is 21 percent above consensus,” the bank said.

The stock was up 2.11 percent at S$8.24 at 3:11 P.M. SGT on Friday.