Record Performance
Record year as net profit crossed S$1b mark. Keppel Corporation (Keppel) yesterday posted unprecedented full-year net profit of S$1.03b (+36.6% YoY) buoyed by a surge in revenue to S$10.4b (up 37.2%) for 2007. All business segments performed better, with contributions from the Property division at 218% higher than the previous year, Offshore & Marine (O&M) sector progressed by 16.6% YoY, Investments business unit improved marginally at 10.7% YoY, and Infrastructure division made an impressive turn-around.
Extended earnings visibility with net order book at S$12.2b. The contracts secured by Keppel O&M division tipped the S$7b mark for the second consecutive year in a row, giving rise to a net order book of S$12.2b and extended earnings visibility into 2011. However, we expect Keppel O&M's order momentum to slow down in 2008 based on an expected influx of new rig deliveries, increasing competition from the Chinese yards, and a pile up of backlog orders against the backdrop of full yard capacity. We note the other concern pertaining to margin erosions as a result of cost escalations in raw material, equipment and labour, especially so in the Brazil yard and the weakening of the USD.
Proposed special dividends and capital distribution. Keppel proposed a final dividend of 10 cents per share and a one-off special dividend of 20 cents per share to commemorate Keppel's 40th anniversary. This brings the total dividend for FY07 to 39 cents per share (including interim dividend of 9 cents). It has also announced a capital distribution of 25 cents per share, giving rise to the final sum of 64 cents per share representing almost 100% payout and 5.6% yield.
Infrastructure business starting to take off. Keppel Integrated Engineering (KIE) secured several large scale infrastructure projects, growing the orderbook to S$3.5b to date and ensuing recurring income stream for the next 10-20 years. KIE's latest project for an EcoPark at Doha North Sewage Treatment Works was announced yesterday.
Revising our estimates, but still a BUY. In view of potential margin erosions and slowdown in order momentum, we are revising down our FY08 earnings estimates to S$962.8m. In addition, we are introducing our FY09 estimates. Based on the current market weakness, we derive a fair value of S$14.80 (from S$17.10 previously) from sum-of-the-part valuation. We reiterate our BUY rating on Keppel.
Major Shareholder: Temasek Holdings 21.3%.
Record year as net profit crossed S$1b mark. Keppel Corporation (Keppel) yesterday posted unprecedented full-year net profit of S$1.03b (+36.6% YoY) buoyed by a surge in revenue to S$10.4b (up 37.2%) for 2007. All business segments performed better, with contributions from the Property division at 218% higher than the previous year, Offshore & Marine (O&M) sector progressed by 16.6% YoY, Investments business unit improved marginally at 10.7% YoY, and Infrastructure division made an impressive turn-around.
Extended earnings visibility with net order book at S$12.2b. The contracts secured by Keppel O&M division tipped the S$7b mark for the second consecutive year in a row, giving rise to a net order book of S$12.2b and extended earnings visibility into 2011. However, we expect Keppel O&M's order momentum to slow down in 2008 based on an expected influx of new rig deliveries, increasing competition from the Chinese yards, and a pile up of backlog orders against the backdrop of full yard capacity. We note the other concern pertaining to margin erosions as a result of cost escalations in raw material, equipment and labour, especially so in the Brazil yard and the weakening of the USD.
Proposed special dividends and capital distribution. Keppel proposed a final dividend of 10 cents per share and a one-off special dividend of 20 cents per share to commemorate Keppel's 40th anniversary. This brings the total dividend for FY07 to 39 cents per share (including interim dividend of 9 cents). It has also announced a capital distribution of 25 cents per share, giving rise to the final sum of 64 cents per share representing almost 100% payout and 5.6% yield.
Infrastructure business starting to take off. Keppel Integrated Engineering (KIE) secured several large scale infrastructure projects, growing the orderbook to S$3.5b to date and ensuing recurring income stream for the next 10-20 years. KIE's latest project for an EcoPark at Doha North Sewage Treatment Works was announced yesterday.
Revising our estimates, but still a BUY. In view of potential margin erosions and slowdown in order momentum, we are revising down our FY08 earnings estimates to S$962.8m. In addition, we are introducing our FY09 estimates. Based on the current market weakness, we derive a fair value of S$14.80 (from S$17.10 previously) from sum-of-the-part valuation. We reiterate our BUY rating on Keppel.
Major Shareholder: Temasek Holdings 21.3%.
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