The market has been lifted recently by a more dovish stance at the US Federal Reserve, and we are now looking for opportunities to realize some of our gains. Among the best performers in our blue-chip portfolio is Keppel Corp, which delivered a double-digit positive return since it was added only eight weeks ago. Apart from the generally firm market tone, Keppel has been getting a lift from firmer oil prices, which could be a harbinger of a better outlook for its offshore and marine (O&M) division.
Indeed, on April 6, Keppel said that its BrasFELS shipyard has clinched a floating production storage and offloading (FPSO) module fabrication and integration project from its existing customer MODEC Offshore Production Systems (Singapore). The value of this contract is worth over BRL 500 million ($190 million).
When we added Keppel to our blue-chip portfolio, the market was according practically no value to its O&M unit. Now, some value is being ascribed to it. But there is a wide variation in opinion on where we go from here.
OCBC Investment Research values Keppel’s O&M segment at book value, or around $1.37 billion. This translates to about 76 cents per share. Based on its sum-of-parts valuation, and further applying a 10% discount, OCBC Investment Research has a fair value estimate of $5.07. The research firm has a “hold” recommendation on the stock.
According to OCBC Investment Research, Keppel should be viewed increasingly as a property play, as the O&M segment could see a continued lack of earnings clarity with low oil prices. Also, the research firm notes that the property segment accounted for some 46% of the group’s earnings in FY2015 ended December, while the O&M and infrastructure segments contributed another 32% and 14% respectively.
Meanwhile, RHB Research Institute says that the market has underestimated the resilience of Keppel’s O&M segment, valuing it at 3.4 times its book value. This translates to some $4.66 billion, or $2.57 per share. Based on its sum-of-parts valuation, the research house derived a price target of $8.08. It has a “buy” call on the stock.
CIMB has a more bullish assessment. It values Keppel’s O&M segment at 4 times book value, or around $5.48 billion. This translates to around $3.02 per share. Based on revalued net asset value (RNAV), the research house has a price target of $5.53. It has a “hold” recommendation on the stock.
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Indeed, on April 6, Keppel said that its BrasFELS shipyard has clinched a floating production storage and offloading (FPSO) module fabrication and integration project from its existing customer MODEC Offshore Production Systems (Singapore). The value of this contract is worth over BRL 500 million ($190 million).
When we added Keppel to our blue-chip portfolio, the market was according practically no value to its O&M unit. Now, some value is being ascribed to it. But there is a wide variation in opinion on where we go from here.
OCBC Investment Research values Keppel’s O&M segment at book value, or around $1.37 billion. This translates to about 76 cents per share. Based on its sum-of-parts valuation, and further applying a 10% discount, OCBC Investment Research has a fair value estimate of $5.07. The research firm has a “hold” recommendation on the stock.
According to OCBC Investment Research, Keppel should be viewed increasingly as a property play, as the O&M segment could see a continued lack of earnings clarity with low oil prices. Also, the research firm notes that the property segment accounted for some 46% of the group’s earnings in FY2015 ended December, while the O&M and infrastructure segments contributed another 32% and 14% respectively.
Meanwhile, RHB Research Institute says that the market has underestimated the resilience of Keppel’s O&M segment, valuing it at 3.4 times its book value. This translates to some $4.66 billion, or $2.57 per share. Based on its sum-of-parts valuation, the research house derived a price target of $8.08. It has a “buy” call on the stock.
CIMB has a more bullish assessment. It values Keppel’s O&M segment at 4 times book value, or around $5.48 billion. This translates to around $3.02 per share. Based on revalued net asset value (RNAV), the research house has a price target of $5.53. It has a “hold” recommendation on the stock.
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
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