CGS-CIMB: Keppel set for ‘equally strong’ second-half earnings

Singapore two-dollar bills

CGS-CIMB said it expected Keppel Corp.’s second-half earnings could be “equally strong” as the first half, pointing to the potential for divestment gains of at least S$114 million from Beijing Aether, a stronger offshore and marine segment, land sales in SSTEC and more property launches expected.

The brokerage said in a note on Friday that Keppel’s second-quarter net profit of S$246 million beat its S$190 million forecast.

It noted that first-half profit of S$584 million was 55 percent of its full-year forecast and 58 percent of the consensus forecast.

CGS-CIMB raised its 2018 earnings per share forecast by 12 percent after a “strong” second quarter, adding it now expected a full-year dividend per share of S$0.32, translating to a 4.6 percent yield.

It pointed to the second-quarter’s S$40 million revaluation gain from Nassim Woods being designated for re-development, the offshore and marine’s share of associates swinging to a S$7 million net profit from a first-quarter loss of S$2 million and the investment division’s S$16 million dilution gain from KDC REIT’s share placement.

In the offshore and marine segment, CGS-CIMB said it expected margins to pick up in the fourth quarter, with the initial milestone recognition of Awilco semisubmersible, contracted at US$425 million, and Pasha vessels, contracted at US$400 million.

For the first half, the offshore & marine division posted a net loss of S$40 million, swinging from a year-earlier net profit of S$11 million, on lower operating results, lower shares of associated companies’ profits, higher taxes for overseas operations and the absence of a one-off divestment gain from Keppel Verolme in the year-earlier period, Keppel’s earnings release said.

In the property segment, CGS-CIMB said Keppel was weathering cooling measures “with many options.”

“Although Nassim Woods has been designated for redevelopment, Keppel is not in a rush to push through given the recent cooling measures in Singapore,” it said. “We believe Keppel’s hold-sell analysis strategy across regional property portfolio could help to weather the impact of cooling measures.”

CGS-CIMB kept its Add call on Keppel, with an S$8.82 target price.

Shares of Keppel ended Friday up 1.87 percent at S$7.09.

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