Keppel shares rise despite reporting middling first-quarter earnings

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Keppel Corp. shares rose after it reported middling earnings, supported by a one-off gain in its property division.

The stock was up 1.98 percent at S$8.23 at 2:50 P.M. SGT, amid strong volume.

The conglomerate reported January-to-March net profit rose 34 percent on-year to $337 million on higher contributions from the property division. Revenue for the period rose 18 percent on-year to S$1.47 billion as higher property and infrastructure revenue offset lower volume in the offshore and marine division.

The property division’s net profit rose nearly 300 percent on-year to S$387 million, mainly on a divestment gain from the stake sale in Keppel China Marina Holdings and higher contributions from Singapore and China property trading.

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.

CGS-CIMB said that the first quarter net profit was around 33 percent of its full-year forecast, but it added: “Given the lumpiness of property divestment gain, we deem the results to be a slight miss because of reported losses in O&M (negative S$23 million) and investment (negative S$43 million).”

For the O&M division, CGS-CIMB said the earnings before interest and taxes (EBIT) margin improved both on-year and on-quarter to 2.4 percent and the brokerage cited the closing of “sub-optimal” operations. It said it expected better margins in the second half of this year.

It kept an Add call with a S$10.00 target price, saying the risk-reward was attractive as the recovery of the O&M division hasn’t been priced in.

OCBC said it would likely be “some time” before the O&M division saw a sustained recovery, but it noted the results were “generally” within its expectations.

The bank noted that the restructuring of the O&M division was nearly done; “This division saw the lowest quarterly revenue in years, but still managed to turn in an operating profit with the streamlining in operations,” the bank noted.

After updating its valuation, OCBC trimmed its fair value for Keppel to S$9.40 from S$9.45, but kept a Buy call.

Buy orders for the stock were clustered around S$8.23, while sell orders were around S$8.24; the intraday high of S$8.30 may act as a near-term cap.