Keppel's 16% profit crash is still good news

You'll be surprised why.

According to Nomura, with a record SGD13.1bn net orderbook, globally recognised brand name facilities and track record, and a broadening Offshore & Marine product base (eg. FLNG development) thanks to an innovative R&D team, it believes Keppel is well placed to weather the more turbulent and competitive environment in 2013/14.

Here's more from Nomura:

Keppel posted a 47% y-y rise in 9M12 net profit to SGD1.62bn, helped by strong property bookings. While 3Q12 net profit declined 16% y-y to SGD346.4mn, this was ahead of our estimate on stronger-than-expected O&M and property bookings.

EBIT margins continue to come in within the guided range of 12-15%, with 3Q12 group EBIT at SGD432.6mn (-17% Y-y) and margins firm at 13.4%.

Stronger-than-expected new order wins spurred by stubbornly high oil prices and limited newbuild availability can be a key catalyst, in our view.

Margins can surprise on the upside as Keppel moves on to book revenue from better priced jack-ups secured later in the 4Q10-2011 period.

We have cut our target marginally to SGD13.20 (from SGD13.80 earlier) mainly due to roll over of our DCF model to 2013. Keppel now trades at FY13/14F P/E of 13.1x/12.4x vs historical P/E band of 8x and 22x with dividend yield of 4.6% and ROE averaging 16.5%, which is attractive relative to peers in our view.

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