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Analysts more optimistic on Keppel after glowing 1H21 results

Jeffrey Tan & Felicia Tan
Jeffrey Tan & Felicia Tan7/30/2021 3:39 PM GMT+08  • 3 min read
Analysts more optimistic on Keppel after glowing 1H21 results
Following the 1HFY2021 results, analysts reckon that Keppel’s bottom line could do even better ahead.
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Analysts are more optimistic on Keppel Corp after the conglomerate posted a glowing set of 1HFY2021 results ended June 30.

UOB KayHian says the company’s better-than-expected performance was attributed to strong operational performance from the urban development, asset management and energy & environment business segments.

“Even excluding exceptional items and government grants, the company would have reported a solid net profit of $280 million,” UOB KH analyst Adrian Loh writes in a July 30 report.

The brokerage has kept its “buy” call for the stock with a higher target price of $6.48 from $6.37 previously.

See also: Keppel readies for a break, caution on OUE surge, respite for STI

CGS-CIMB Research says all of Keppel’s business segments were profitable in 1HFY2021, except for infrastructure, which recorded a net loss of $269 million due to $318 million of impairments from KrisEnergy’s liquidation.

“It’s all coming together,” CGS-CIMB’s head of research Lim Siew Khee writes in a note dated July 29.

CGS-CIMB has maintained its “add” rating for the stock with a higher target price of $6.90 from $6.40 previously.

PhillipCapital says the group’s net profit of $299.8 million stood above expectations, at 70.8% of its FY2021 earnings estimate.

“1HFY2021 interim dividend of 12 Singapore cents, up four times from last year, reflects management’s confidence in the group’s prospects,” notes the brokerage’s senior research analyst Terence Chua.

To this end, Chua has maintained his “buy” rating on the group with a higher target price estimate of $6.28 from $6.20, as he ascribes a higher P/BV of 0.8 times from 0.7 times previously to its O&M division on the back of the sector’s improving outlook.

“Our target price translates to about 1.0 times FY2021 book value, a slight discount to its 5-year average of 1.05 times. Catalysts expected from contract wins and a successful resolution to its O&M unit,” he writes.

“We continue to value its property segment at a 40% discount to RNAV and infrastructure division at 12 times FY2021 earnings, in line with peers. We value M1 at 12 times FY2021 earnings, a slight discount to listed peers’ average of 13 times. Keppel’s stake in Sino-Singapore Tianjin Eco-city is valued at 1.5 times book value. We also apply a 10% holding-company discount,” he adds.

With the potential merger of Keppel O&M and Sembcorp Marine, Chua believes shares in the group will be re-rated.

On July 29, Keppel reported earnings of $299.8 million for the half-year period, reversing from a net loss of $537.1 million in the previous corresponding period.

Its revenue, too, increased 15.5% y-o-y to $3.68 billion due to higher contribution from the urban development, asset management, as well as energy and environment segments.

Following the results, analysts reckon that Keppel’s bottom line could do even better ahead.

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UOB KH has raised its FY2021 earnings forecast by 32% to factor in the stronger-than-expected 1HFY2021 performance of the urban development and asset management businesses.

CGS-CIMB, on the other hand, has adjusted its FY2021-FY2023 earnings per share forecasts to account for higher losses in offshore and marine, offset by higher asset management and infrastructure earnings.

PhillipCapital has also upped its earnings forecast for the FY2021 by 46% for higher estimates on its O&M, Urban Development and Asset Management businesses “on promising tailwinds”.

As at 3.39pm, shares in Keppel Corp were trading at $5.51.

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