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Keppel Corp

PostPosted: Thu May 08, 2008 9:13 am
by winston
From CIMB:-

Won US$512m semi-submersible rig contract

Keppel FELS has clinched a US$512m contract to build an ultra-deepwater semisubmersible for a subsidiary of its long-time customer, ENSCO. The is the fifth rig that Keppel will be building for ENSCO, with delivery scheduled in 2H2011.

20% premium in 12 months. The rig is at a 20% premium to ENCSO’s fourth semisubmersible ordered in Jun 07 (US$427m). We believe the premium is to account for specification modifications as well as higher equipment cost and inflation. The
willingness of rig operators to invest despite a significant jump in pricing suggests that the overall market for deepwater drilling remains robust on the back of sustainable utilisation and high day rates.

YTD order wins doubled to S$1.3bn, boosting order book to about S$12.5bn. We maintain our order assumption of S$5bn for 2008, driven by deepwater drilling units and production-related equipment. Nevertheless, earnings estimates lowered by 2-5% for FY08-10. This mainly accounts for our colleague’s recent downgrade of Keppel Land’s earnings on the back of slower project launches in Singapore. We also adjusted our O&M order-book recognition for FY09-10.

Figure 1: Semi-submersible ordered by Ensco 2005-YTD
Date of contract Rig name Value (US$m) Delivery
1 23-Sep-05 Ensco 8500 312 4Q08
2 23-Jan-06 ENSCO8501 338 1Q09
3 26-Sep-06 ENSCO 8502 385 4Q09
4 7-Jun-07 ENSCO 8503 427 3Q2010
5 6-May-08 ENSCO 8504 512 2H2011
Source: Company

Valuation and recommendation
Maintain Outperform but target price lowered to S$13.20 from S$13.70, still based on sum-of-the parts valuation. Sizeable order flows from O&M and the delivery of projects with sustainable margins are key catalysts, in our view, building up its
earnings visibility beyond 2011.

Not vested..

Re: Keppel Corp

PostPosted: Thu May 08, 2008 9:23 am
by winston
From CLSA:-

Fallen enough

Keppel has fallen 13% since its results (including 4% ex-div), now back to the levels where we see adequate upside of 18% to our unchanged S$12.40/sh sum-of-parts based target estimate which warrants outperformance relative to the 7% upside to the index on bottom-up index valuations.

Implied O&M 09PE valuation is a reasonable 9x and the stock also holds potential dividend or capital payout upside. Upgrade recommendation to Outperform.

Key investment considerations:

1) Burgeoning O&M order book of c. S$12bn cements profit growth and visibility for next two years. Area of potential surprise is margins where the market has been disappointed in the last few quarters; but the impact of higher balance book completion percentage later in the year and higher mix of later-dated better-priced contracts executed should drive a ~100-150bp margin increase in 2008.

2) In our view the peak of the new rig orders in this cycle is now behind us. We expect YoY orders to be 10-15% lower in 2008 and 2009 as adequate rig capacity is already now being built; however a boom-bust rigbuild cycle similar to the eighties is not expected this time around, given that our expected US$70/bbl+ crude price environment will continue to support a reasonably high level of E&P activity (unlike the sharp oil correction seen during the last rigbuild cycle).

3) Falling gearing, EVATM focus and proactive capital management already demonstrated by Keppel in past few years indicates dividend upside to our forecasts based on regular payout guidance. We expect overall yield could surprise our base case forecasts by 1-1.5%.

4) Property is the area of Keppel’s business portfolio that may potentially disappoint in 2008 given a softer Singapore residential demand and office rent outlook. High end residential launches in the market are already being delayed by 2-3 quarters as developers take on a wait-and-watch attitude towards a market recovery.

5) Target price unchanged with 18% upside. Our sum of parts based 1-yr forward NAV estimate is S$13.10/sh, and target price imputing a 5% holding company discount to is unchanged at S$12.40/sh. Keppel’s implied offshore and marine forward 09PE multiple is just 9x.

Re: Keppel Corp

PostPosted: Fri May 09, 2008 10:45 am
by LenaHuat
Did any1 attend KepC's AGM recently?

On 25th April 2008, KepLand's AGM was held in the morning and KepC's AGM was held in the afternoon at the 4 Seasons Hotel. I attended KepL's, had a good buffet lunch, scooted to Borders Bkstore and forgot abt the afternoon session.

But let me give U my impressions of LCO's handling of the AGM. I think he came across intentionally as intimidating and would brook no nonsense. He opened the meeting that carried resolutions as follows : "Any shareholder who wishes to ask any question can do so only after I have carried the resolution. Pl give me your name. U do not have to tell me how many shares U have. Pl keep the Q short".........................Lor, it worked. NO1 asked anything!

He was so different from Dr Richard Hu at CapitaLand's AGM. Dr Hu sounded like this : "Questions??. Oh bring them on!".

Re: Keppel Corp

PostPosted: Fri May 09, 2008 3:20 pm
by winston
From DMG:-

Keppel has a diversified portfolio that spans across Offshore & Marine (O&M), Property, Infrastructure and Investments business segments. The diverse business mix should protect its earnings from a drastic slowdown in any one market and reduce overall earnings volatility.

While we still believe that Keppel would continue to enjoy strong earnings from O&M in this favourable oil and gas sector climate, the Infrastructure arm is slated to be the next defensive recurring income stream in years to come.

O&M – Strong orderbook. Keppel O&M secured unprecedented S$7.4b in new orders in FY07 – exceeding the previous peak of S$7.3b in FY06. Keppel O&M’s strong net orderbook of S$12.7b, as of 8 May 08, provides earnings visibility till 2011. We expect O&M to constitute dominant share of 64% of FY08F operating profits.

Property – Previously-sold property units to support revenue. Given the weak sentiments currently, there should be limited launches from KepLand within the domestic residential property sector, with FY08F revenue projected to be mostly derived from the progressive recognition of previously transacted units. Although this could prove to be a dampener, we continue to favor its overseas footprint, especially Vietnam and China. We are forecasting property to contribute 32% of FY08F operating profits.

Infrastructure – New growth driver. We estimate Infrastructure to contribute 14% of FY08F revenue and 13% of RNAV. The recurring income stream from its power barges in Ecuador, NEWater, COGEN plant will provide defensive revenue stream.

TP at S$12.76 offers 19% upside. We ascribe the sum-of-the-parts valuation metric to 12-month forward NAV and derive our target price of S$12.76, representing a 19% upside potential. This target price implies a forward FY08F PE of 19.5x, in line with the regional conglomerate peers. Keppel currently trades at FY08F PE of 16.2x EPS.

Re: Keppel Corp

PostPosted: Thu May 22, 2008 3:00 pm
by winston
Not vested. From DBS:-

In search of value

Story: The recent contract for the building of ENSCO 8504, a semi-submersible rig, awarded to Keppel Corp’s O&M division by ENSCO brings YTD order wins to S$1.4bn, and accounts for 23% of our FY08 order wins assumption of S$6bn. Their current outstanding order book stands at S$12.5bn.

Point: While this award was not unexpected and had no impact on our earnings forecast, this contract win supports our view that order flows are likely to feature more deepwater floaters and production equipment.

Also, while jackup enquiries are still there, we expect orderflow from this segment to flatten out or even decline, as the supply and demand dynamics are more
evenly matched for jackups, given that day rates have been peaking in certain market segments.

While O&M margins recovered by 4.3ppts q-o-q to 9.4% in 1Q08 due to the absence of losses stemming from the P-52, revenues and net profit from this division declined 9% y-o-y (to S$1.4bn) and 13% (to S$131m) respectively, despite their growing order book.

However, management reassured that all projects are on track and there are no delays. Guidance for O&M revenue for FY08 is conservative and likely to match 2007’s S$7.3bn.

Relevance: Recurring net profit growth is unexciting at 12% and 10% for FY08 and FY09 respectively. Maintain Hold, with TP unchanged at S$12.56, based on a 10% discount to RNAV of S$13.96.

Re: Keppel Corp

PostPosted: Tue May 27, 2008 4:40 pm
by winston
Not Vested.

Keppel Attracts SunAmerica as Cheap Way to Brazil Oil
By Kyunghee Park

May 26 (Bloomberg) -- Brazil's push to find $135-a-barrel crude in water more than 2 kilometers deep is prompting AIG SunAmerica Asset Management Corp. to invest in Keppel Corp., the world's biggest oil-rig maker.

Jersey City, New Jersey-based SunAmerica Asset, owned by American International Group Inc., bought 865,000 shares after a 24 percent decline in the first quarter, according to regulatory filings. Since then, Singapore-based Keppel has climbed 19 percent, five times as much as the Straits Times Index. The shares, priced 19 percent below smaller competitor Sembcorp Marine Ltd. based on estimated 2009 profit, may rise 27 percent to S$15 over the next 12 months, according to Merrill Lynch & Co. analyst Melinda Baxter.

``Demand for rigs and floating platforms will continue to be robust for at least the next four to five years,
'' said Soo Hai Lim, a member of the emerging-markets team responsible for $12 billion of Asian equities, including Keppel, at Baring Asset Management Ltd. in Hong Kong.

``We favor Keppel and Sembcorp Marine because they are the leaders in the industry,'' said Lim, whose firm is a unit of Springfield, Massachusetts-based MassMutual Financial Group.

Untapped Reserves

Keppel is selling more deep-water rigs, which are twice as expensive as those for shallower water, as supplies tighten amid an intensifying search for untapped reserves further from shore. That helped the company post profit margins last quarter that were 1.9 percentage points wider than Sembcorp Marine's, according to data compiled by Bloomberg.

Of 20 analysts surveyed by Bloomberg, 16 recommend buying Keppel and four say to hold it. The company's offshore and marine unit accounted for half of first-quarter net income.

Keppel dropped 2 percent to close at S$11.56 in Singapore. Sembcorp Marine fell 2.9 percent to S$4.35.

Petroleo Brasileiro SA, Brazil's state-owned oil company also known as Petrobras, plans to order 40 drill ships and platforms worth about $30 billion for delivery by 2017 after finding the Tupi field, the largest Western Hemisphere discovery since 1976. The field may contain 5 billion to 8 billion barrels.

``We are likely to see order-book momentum picking up again in the short term,'' Winnifred Heap at JPMorgan Chase & Co. in Singapore wrote in a May 21 note. The analyst rates Keppel and Sembcorp Marine ``overweight.''

An offshore platform takes as long as 32 months to design and build after a contract is signed. That means Petrobras will continue to award orders until 2014 to meet a 2017 delivery target, according to analysts.

More Spending

Keppel and Sembcorp Marine may capture 27 percent of the global market this year for semisubmersible rigs, which use anchors weighing more than 10 metric tons, JPMorgan said.

Petrobras, based in Rio de Janeiro, said May 21 it struck oil in a well in 2.1 kilometers (1.3 miles) of water off the coast of Sao Paolo state. The company has leased about 80 percent of the world's deepest-drilling offshore rigs to explore that find and other prospects.

The head of Brazil's oil agency said last month that the nearby Carioca field may hold 33 billion barrels of crude, making it potentially the world's third-largest. Petrobras is evaluating the field and hasn't confirmed the estimate.

Such findings may require even more offshore-equipment spending, Petrobras Chief Financial Officer Almir Barbassa said May 21.

Oil companies including Exxon Mobil Corp., Royal Dutch Shell Plc and BP Plc will spend a record $98.7 billion this year on exploration and production, more than quadruple the amount eight years ago. Crude oil rose to a record of more than $135 a barrel on May 22 as OPEC ministers said they could do nothing to stop a rally that may be heading to $200 a barrel.

Jumping Prices

``The underinvestment in the 1980s and '90s in the industry gave rise to this jump in the oil prices,'' Choo Chiau Beng, Keppel's senior executive officer, said April 24. ``There will be demand for offshore equipment.''

Keppel, whose Brazilian yard is the largest in the Southern Hemisphere, has completed projects for Petrobras that produce more than half the country's output of 1.8 million barrels a day, according to Keppel's Web site.

The Singapore company's S$11.8-billion ($8.69 billion) backlog at the end of March includes a $1.2 billion Petrobras contract for a semisubmersible platform.

Demand for the offshore units has pushed up prices the past two years. Samsung Heavy Industries Co., the world's second- largest shipbuilder, won a record $942 million order for a drill ship earlier this month from Stena AB, owner of Sweden's biggest ferry company.

Rising Costs

Higher labor and material costs associated with construction of the P-51 offshore platform for Petrobras helped push Keppel's fourth-quarter operating profit, or sales minus the cost of goods sold and administrative expenses, down 40 percent. That prompted DBS Vickers Securities to advise caution on the shares.

``We are still avoiding Keppel for the moment,'' the Singapore firm said in a May 22 note. It has a ``hold'' rating for Keppel.

Even so, investors say the tight yard capacity and higher fuel prices will translate into more offshore-equipment orders, extending the industry's boom.

``The upcycle for offshore equipment, like drill ships and offshore platforms, has just started,'' said Park Hyoung Ryol, who helps manage $1.2 billion, including Samsung Heavy shares, at Consus Asset Management Co. in Seoul.

Re: Keppel Corp

PostPosted: Mon Jun 02, 2008 3:25 pm
by winston
Not vested. From Kim Eng:-

Keppel Corporation (Rohan Suppiah, DID: 64321455)
Previous Day Closing price: S$12.12
Recommendation: Buy (maintained)
Target price: S$15.00 (maintained)
♦
New semi contract at US$537m
-
Keppel Corp has announced that its Keppel FELS subsidiary has won a contract to build a US$537m ultra-deepwater semisubmersible drilling rig ENSCO
-
This contract follows shortly after of the award of the fifth semi, ENSCO 8504, that was announced on 6 May.
-
It is the 6th consecutive semi that Keppel FELS is constructing, and is scheduled for delivery in the first half of 2012.
♦
Price is 5% higher
-
The contract price is 5% higher than the price agreed for the 5th semi contracted at US$512m less than a month ago.
-
While equipment and input prices may be a factor, we believe that this is on the back of an expected surge in orders due to increased demand for deepwater rigs.
♦
Rise in demand across the board
-
Recently, Petrobras announced that it is looking to spend US$30bn on deepwater rigs and supporting vessels over the next 8 years.
-
Equipment owners such as Ensco therefore have the added incentive to “pull the trigger” on new construction despite the long lead time for delivery – in this case, 43-45 months.
-
Similarly, SembCorp Marine announced last week a Letter of Intent from Seadrill to construct a semi for US$640m for delivery in 42 months.
-
Both contracts will take longer to execute versus the previous norm of a 36 month lead time.
♦
Maintain Buy to S$15.00
-
We are leaving our forecasts for Keppel unchanged, as this latest contract has a small proportion of contributions over our forecast period.
-
We expect FY08 net profit to grow by a marginal 1%, in line with our expectation of a near term plateau from O&M, as its yards are already heavily utilized.
-
Our Buy recommendation is maintained - SOTP fair value stands at S$15.00.

Re: Keppel Corp

PostPosted: Wed Jun 04, 2008 1:29 pm
by winston
Not vested. From DBS:-

Just two days after announcing its last contract win, Keppel Corp has secured another contract. The contract is valued at US$385m and is a repeat order to build a semisubmersible drilling rig for Brazilian driller, Queiroz Galvao Oleo e Gas (QGOG).

This price excludes the drilling and subsea equipment which will be supplied by the customer, QGOG.

This rig will be built to the DSS 38 design jointly developed by Keppel O&M's technology arm Deepwater Technology Group and Marine Structures Consultants of The Netherlands. It's design can operate in water depths of 9000ft and can meet the operational requirements in the
deepwater "Golden Triangle" region, comprising Brazil, Africa and the Gulf of Mexico.

This latest rig, to be named Alpha Star, is a repeat order of the first semisubmersible, Gold Star, which was awarded to Keppel in August 2006. Gold Star will support Petrobras' growth plans when delivered in 2H09, whilst Alpha Star may be deployed in either offshore West Africa or South
America, when delivered in 2H2011.

With this, YTD wins will amount to S$2.8bn and account for 46% of our order win assumption of S$6bn. Order book estimated to rise to S$13.9bn. No change to earnings estimates as we have already assumed S$6bn of contract wins for FY08.

We believe that contract flows over the last one week have stemmed from Petrobras' requiring up to 12 drilling rigs (could be a combination of jackups, semis and drill ships) with delivery dates by mid 2012. Both yards are currently able to deliver semis in both 2011 abd 2012 while for jackups,delivery slots for delivery in 2010 are still available.

Maintain Hold, TP S$12.56.

Re: Keppel Corp

PostPosted: Thu Jun 19, 2008 9:54 am
by millionairemind
DJ MARKET TALK: Citigroup Trims Keppel Corp Target To S$12.97

Written By Dow Jones Newswires on 19 Jun 2008 Dow Jones News Add comments (0)

0151 GMT [Dow Jones] STOCK CALL: Citigroup trims Keppel Corp. (BN4.SG) to S$12.97 from S$13.25 after cutting FY08-10E estimates by 6%-8% on slower contribution from Property, Infrastructure and O&M segments. However, keeps at Buy as says O&M concerns may be overdone.

"Feedback from investors highlight worries over orderbook momentum and potential execution issues (e.g. delays, cost overruns) but we believe pushback in deliveries are more likely related to equipment sourcing by vendors or variation orders, so risks of penalties are unlikely.

We remain upbeat on the industry and Keppel remains well positioned to maintain market share." Share down 1.2% at S$11.34. (LES)

Re: Keppel Corp

PostPosted: Fri Jun 20, 2008 1:32 pm
by LenaHuat
KC is an evergreen in my portfolio. Earlier on 27 May 2008, I gave a link to the following report of The Telegraph in the "Oil & Gas" thread. I am re-posting it here because I need this report when I subsequently connect the dots. We should hear alot abt oil from the seabeds in the future. KC is a good long-term play on deepsea oil.

Oil crisis triggers fevered scramble for the world's seabed
Last Updated: 10:52pm BST 30/05/2008


Have your say Read comments

Record prices drive secret underwater land-grab as old enemies capitalise on colonies. Ambrose Evans-Pritchard reports

A fevered scramble for control of the world's seabed is going on - mostly in secret - at a little known office of the United Nations in New York.

Bemused officials are watching with a mixture of awe and suspicion as Britain and France stake out legal claims to oil and mineral wealth as far as 350 nautical miles around each of their scattered islands across the Atlantic, Pacific, and Indian oceans. It takes chutzpah. Not to be left out, Australia and New Zealand are carving up the Antarctic seas.

The latest bombshell to land on the desks of UN's Commission on the Limits of the Continental Shelf is a stack of confidential documents from the British Government requesting an extension of UK territorial waters around Ascension Island, St Helena and Tristan da Cunha.

The three outposts between them draw big circles in the Mid and South Atlantic, covering unexplored zones that may one day offer deep reserves of crude oil and gas.

A similar request has already been made for eastward expansion from the Falklands and South Georgia - much to the fury of Argentina. "If the British do not change their approach, we shall have to interpret it as aggression," said President Nestor Kirchner, before he handed power to his wife Cristina.

Ascension Island - famed for its enormous green turtles - is a dusty cluster of 44 volcanoes, covered with cinder. It is barely big enough to host America's "Wideawake" airfield and a tracking station for Ariane 5 space rockets. First garrisoned by the British in 1815 to keep an eye on Napoleon, it now boasts 1,100 hardy souls. St Helena - the "Atlantic Alcatraz" - is yet more remote, if greener

The forgotten relics of the Empire make Britain a player in the marine race. There are the waters off the Falkland Islands and South Georgia, already home to a clutch of oil exploration companies; the Pitcairn Islands in the Pacific; Diego Garcia in the Indian Ocean; and a string of outposts such as Montserrat, the Caymans, the British Virgin Islands, the Turks and Caicos, and Bermuda.

The French "Outre-Mer" is a bigger network - from the Isles Crozet to Saint-Paul and Kerguelen in the southern seas, to Clipperton off western Mexico. They too have been busy at the UN, requesting an extension of their zone off French Guiana and New Caledonia.

All the maritime powers are nibbling gingerly at the edges of Antarctica, though the Antarctic Treaty bans fresh claims on the world's last pristine landmass.

The two-page summary of Britain's submission to the UN gives little away. It merely notes that the UK is providing information on the limits of shelf "beyond 200 nautical miles", adding that there will be further requests. A Foreign Office spokesman said the motive was to "protect the environment".

Greenpeace demurs. "It is a grab for resources. These countries are in a panic about commodity prices and now view the seas as key to their national security," said Charlie Kronick, the group's climate chief.

The Law of the Sea allows the maritime powers to claim 200 miles of waters around their islands. They can win an extension to 350 miles if the geology of the seabed fits a set of complex technical conditions.

The requests are studied by a panel of world experts, and usually granted on a strict scientific basis. This is not conducted like the Eurovision Song Contest, where imperialists score "nul points".

The deadline expires in May 2009, so there is now a rush to stake out claims. If countries waive their right, the area from 200 to 350 miles automatically returns to the world community: claim it now, or lose it forever.

In a sense, the system is deeply unfair. China gets virtually nothing. Poor landlocked countries get absolutely nothing. Yet the old powers - after enjoying the fruit of imperial rule for four centuries - enjoy a second bite of the cherry. "The sea goes to the most powerful states that were able to colonise the remote parts of world. That's the way the law is," said Martin Pratt, head of the international boundaries unit at Durham University.

Nobody has ever explored these regions thoroughly for oil and minerals, although Mr Pratt said there was a burst of interest 20 years ago in "polymetallic nodules" - boulders of manganese, and such, on the sea floor. Commodity prices did not stay high enough to make it worthwhile investing, and the waters were mostly too deep.

That calculus is now changing fast as oil futures contracts for 2016 vault to $135 a barrel. The International Energy Agency warns that world output will fall far short of the estimated 116m barrels per day by 2030 unless there is massive investment.

The technology of deep-water drilling is improving in leaps and bounds. Three-dimensional seismic imaging can look through the salt canopies that cover up reserves and play havoc with exploration.

The ageing North Sea rigs drill to around 3,000ft: the Jack 2 test well, run by a consortium of oil companies, plunges through 7,000ft of water and 20,000ft of sea floor into the entrails of the earth below the Gulf of Mexico.

The state-of-the-art fields off Angola may soon be routinely drilling at near 9,000ft. It is no longer far-fetched to imagine rigs drilling as deep as 15,000ft, once oil companies learn to cope with crude gushing out at temperatures of 300C.

Shell and Lasmo explored the Falklands in the 1990s, but gave up when crude prices crashed to $10 a barrel. Nothing much came to light. Desire Petroleum, Rockhopper, Borders & Southern and Falkland Oil and Gas are all probing again. Desire plans to start drilling this year. "A working hydrocarbon system in the North Falkland Basin has been established," it said.

Dr Phil Richards from the British Geological Survey - who helped to prepare the UK's extension claim - doubts stories that the area could hold 60bn barrels of oil (Saudi Arabia purports to have 260bn).

"That is not credible. It is based on how much oil the rocks are potentially capable of holding. We won't know how much there is until we actually drill. All we have so far are educated guesses," he said.

Mr Richards denies that the Government is privy to secret discoveries. "There are no vast reserves that we know about. But who knows, it may come good for our grandchildren," he said.

Is it in the interests of mankind to tap deep-sea reserves? We may have no choice. The world has consumed one trillion barrels of oil already. The second trillion is located but not yet tapped, and will take us to 2035 or so. The third trillion eludes us. Any suggestions?