Keppel eyes 5bn worth of orders in 2013

But here's why analyst thinks it's a conservative target.

According to CIMB, Keppel's management hopes to clinch S$3bn-5bn worth of orders in FY13. However, CIMB thinks this is conservative.

CIMB adds, FY12, KEP landed a non-Brazilian order of about S$5bn, which included a letter of intent (S$1.5bn) from Naftogaz for two semi-subs. CIMB
believes its S$5.5bn target is achievable, with orders coming from semi-subs, FPSO conversions and harsh-environment jack-ups.

Here's more:

Keppel announced it had bagged contracts worth about S$570m in two days. The contracts comprised: 1) S$200m worth of FPSO-related contracts from Modec and Toyo (integration of topside modules) and SBM Offshore (fabrication of a turret for a newbuild FPSO)

2) US$300m rig-related contracts from Star Drilling (B-class jack-up), Ensco (semi-sub upgrade) and Diamond Offshore (semi-sub upgrade).

We maintain our Outperform rating and RNAV-based target price. Also our EPS estimates stay unchanged as Keppel’s order wins fall within our
S$5.5bn orders target for 2013.

We see catalysts from: 1) stronger-than-expected margins from the delivery of 21 jack-up rigs in 2013, with the potential for back-end loading of profits; and 2) more orders than expected.

Due to commercial sensitivity, Keppel cannot disclose the contract size of the B-class jack-up, but we estimate the value at about US$210m, similar to the jack-up rigs ordered by Pemex in 2012.

The Star Drilling jack-up is expected to be delivered in 4Q14, suggesting that it could be a fast-track job, potentially yielding a better margin. With the delivery of 21 rigs in 2013, mainly from Singapore, we see the need for Keppel to replenish its order book to fill up yard capacity for 2014.

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