SINGAPORE (Jan 12): RHB is keeping its “buy” call on Keppel Corp with a target price of $6.52 on the basis that its property and infrastructure arms, Keppel Land and Keppel Infrastructure, will continue to support the group’s earnings.

In its Singapore Strategy report released recently, RHB estimates that Keppel Corp is presently being valued only on its property, infrastructure and investment segments which the research house thinks are “doing well”.

At the same time, it reckons Keppel’s offshore & marine (O&M) unit is “hunkering down” with new contracts of about $500 million as of late 2016 as well as an ex-Sete Brasil orderbook of $4.1 billion.  

Under its residential property arm, Keppel has 16,327 units to be launched from 4Q16 to 2018, while its commercial arm has 1.1 million sqm of gross floor area (GFA) under development. Keppel also recently announced a $36 million contract to provide technology and services to a waste-to-energy plant in Shenzhen, China, which is expected to be completed by FY18, recalls RHB.

The research house adds that deliveries on the way include $500 million worth of contracts in the year to date for four Floating Production, Storage and Offloading (FPSO) projects, a pipe lay vessel upgrade, and two dual fuel tugs.

“Although has had a tough 2016 amidst the sharp decline in oil prices, we believe a reversal in the oil prices trend during 2017 should support gradual recovery in the company’s earnings in the medium term,” says RHB, assuming crude oil prices average at US$60 per bbl this year and going forward.

“This price level should incentivise oil majors and upstream players to kick-start long-delayed exploration activities and renew demand for exploration and production vessels that are manufactured by Keppel.”

Shares of Keppel closed 3 cents higher at $6.13 on Wednesday.