Goldman Sachs upgrades Keppel Corp (BN4.SG) to Buy from Neutral, raises its target to $13.00 from $11.00; “we expect KEP to deliver the largest increase in CROCI through 2013E within our O&M coverage universe, as its leading Singapore yard status makes it the best-placed to benefit from this upturn.”

The house raises its new order assumptions and upgrades its 2010-2012 EPS estimates by 8.0% (now 11% above consensus). The new target implies 15% potential upside. It cites three reasons to be positive:

 

1) expects KEP to win more orders than peers given its strong track record, more geographically-diversified presence and wider product portfolio; 

 

2) expects KEP to win slightly higher quality orders than peers, with better payment terms and more repeat orders; 

 

3) says the market is over-penalizing KEP’s conglomerate structure. “Indeed, valuations for both its O&M division and on a group basis look compelling...given the range of likely catalysts, we expect KEP’s shares to re-rate.” 

 

Its shares rise 1.1% to $11.46.