Keppel pops the champagne on $5.1b order wins

Could reach $6.6b by end-2013.

According to CIMB, Keppel's YTD order win now stands at S$5.1bn, with the potential to reach S$6.6bn if the six jack-up rigs (assuming US$206m/rig) from Pemex are announced before the year ends.

Here's more from CIMB:

With the Central Panuco contract win (US$240m), we estimate Keppel’s order book to be about S$14.3bn now and could end the year at S$13.8bn or +8% yoy from end-2012.

We maintain our order target, EPS estimates, RNAV-based target price and Outperform rating. Catalysts could come from higher margins, strong orders and drillship orders.

What Happened
Keppel’s US yard, AmFELS has secured a jack-up rig from repeat customer, Central Panuco, a subsidiary of Perforadora Central.

The current contract of US$240m includes owners’ furnished equipment. Delivery is expected in 4Q15. Payment terms are on a milestone basis. With this contract, a total of 13 KFELS B-class jack-up rigs
have been ordered for the Mexican market since 2010.

What We Think
We estimate the yard cost without owners’ equipment to be about US$216m or 5% higher than if it was built in Keppel to account for higher labour costs.

Owners’ furnished equipment seems to be a populartrend now (the last two jack-up rigs for Clearwater were structured similarly at US$220m/rig), in line with most of the jack-up rigs being ordered in China.

Although there is no major difference in margins for such contracts, we believe this could be a positive move as the onus falls on the owners to secure drilling equipment, reducing bottleneck risks at the yard as equipment maker, such as NOV, face long delivery lead times (24-28 months).

We estimate the EBIT margin of 15% for this contract.

It is not too late to accumulate. We expect consensus to upgrade order wins for 2014 to S$6bn-6.5bn (current S$5bn-5.5bn) with the continuous momentum in jack-up rigs and the return of other equipment (semi-subs, FPSO conversions, semi-sub accommodation and drillships).

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