Will Keppel samba its way to the bank?

If you were in charge at Keppel Corporation, now would be the time to take a cue from Tom Cruise in Jerry Maguire and yell at the top of your voice, “Show me the money!” One of the largest offshore and marine groups in the world finally has the go ahead for a rigs costing, an eye-popping US$1.2 billion for Skeie Drilling to go ahead. And Lim Siew Khee, an analyst from CIMB-GK believes that it is unlikely for the three N-class jack-up harsh environment rigs for Skeie Drilling to be cancelled given the positive development with the restructuring and consensual agreement reached with bondholders.
And that isn’t all, there is news that Keppel and WTorre are currently in talks surrounding the possible acquisition of Estaleiro Rio Grande (ERG) shipyard in Brazil. Now what is the big deal about ERG that makes Keppel wants to take over the shipyard? Well, according to Lim, ERG is designated to build eight FPSO hulls for Petrobras which could potentially add a sweet US$4 billion (or US$500 million per hull) to Keppel’s order book of S$9.5 billion. Add the $1.47 billion from Petrochina brought about from the sale of SPC which has strengthened Keppel’s cash position, which Lim believes is likely to be deployed for Infrastructure M&As and may be preserved as buffer for potential aid to rig customers with financing difficulties. The recent equity raising has also alleviated funding overhang for Keppel Land. While Keppel Land has indicated that part of the proceeds could be used to pursue strategic acquisitions, we believe that any potential M&A is still in the infancy stage. In the near term, we see the bulk of the proceeds could be channelled to development capex and capital-management initiatives. Recall that office developments in progress include Marina Bay Financial Centre 1 & 2 and Ocean Financial Centre. Sentiment in the sector has since recovered, with transaction volumes improved dramatically over the last four months. Successful new launches in both China and Singapore could further augment Keppel Land’s balance sheet health. This may just make the management from Keppel Corporation much happier than a group of eighteen-year-old boys left unsupervised at the Playboy mansion.

F&N on a sugar high
Frasier & Neave, or F&N for short, has hit a sweet spot not only for their famed canned but also for property. According to analysts from DBS Group, recent launches by the Group have met with overwhelming response in terms of units sold and ASPs. The latest being 8@Woodleigh, which sold 90% of the units over its soft launch last weekend at ASPs of S$770 per square foot, 10% above industry observers’ expectations. Higher-end projects such as Martin Place Residences also met with keen response, at ASPs between S$1,450 per square foot to S$1,700 per square foot, much higher than the S$1,250 per square foot that industry analysts had anticipated.And it isn’t only in the local property market that F&N is seeing significant growth. Recent positive property sentiment in China could also bode well for the corporations developments in the People’s Republic.Apart from overwhelming property sales, Frasier & Neave also has a current landbank of 930 attributable units in Singapore which according to analysts from DBS Group is relatively low. The same analysts from DBS Singapore Research Team say that the F&N Group will be looking to acquire land, particularly from URA’s Reserve List GLS. This possible acquisition of land could be a catalyst for the counter, if it materialises, as it first of all signals a positive on-the-ground view of the property market and will prompt an upward revision on RNAVs.

Strait and Narrow
Straits Asia Resources (SAR), the first pure mining company to be listed in Singapore, has seen its share price more than double since March which is in tandem with the resurgence of oil prices. The impact of global economic stimulus plans has started to flow into the real economy, leading to tighter energy markets. Improvements in fundamentals bode well for SAR, as firmer coal prices will boost its revenue. Management holds the view that energy markets will continue to tighten in the second half of this year and is optimistic that its 2010 financial year output will be priced at more favourable levels than recent spot prices of around US$60 per ton.