Keppel Corp stock price set to spike after terrific 3Q13 results

Potential 21% upside, says Barclays.

Following the release of Keppel Corporation's 3Q13 results which showed a 20% jump in adjusted net profit to S$403m, Barclays Research predicts "positive implications" for its stock price.

In particular, offshore margins surprised positively. The company’s offshore & marine segment delivered an operating margin of 16.5% for a fourth sequential increase q/q in operating margins.

"This further consolidates its position as the most profitable rig-builder in the industry currently," said Barclays, explaining that the strong margin was a result of the delivery of five KFELS B class jack-up rigs (repeat designs) in the quarter as well as a higher volume of higher-margin repair work.

Keppel Corporation was also buoyed by strong operating margins for the company’s other three segments with the property segment delivering an operating profit margin of 49.5% (vs 29.6% in 2Q13).

The infrastructure segment remained profitable in the quarter with the company still facing delays in its Doha and Manchester EPC projects, offset by increased contracted load from the expanded Keppel Merlimau Cogen Plant. No new provisions were taken in the quarter for those two projects, and they remain on-track for completion in 2Q14.

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