Keppel Made More Provisions in 2016 but Core Profit above Expectation; Raising FVE to SGD 5.00
Narrow-moat Keppel Corp’s headline 49% drop in 2016 net profit to SGD 784 million masked a better-than-expected core performance. Stripping out provisions for impairment of SGD 336 million, core earnings beat our forecast on higher-than-expected revenue and we increase our 2017-18 earnings forecasts by 4%-6% to reflect cost cuts. Our fair value estimate is increased to SGD 5.00 from SGD 4.56. Although Keppel is currently trading below its book value, we think a lower valuation at about 0.75 time...Keppel is an investment holding company. Co. is engaged in provision of management services. Through its subsidiaries, Co. is principally engaged in offshore oil-rig construction; shipbuilding; ship repair and conversion; chartering tugs and other marine services; environmental engineering; power generation; provision of broadband services; provision of telecommunication network services; trading of communication accessories; shipping operation; warehousing and distribution; property development and investment; property fund management; and investments. Co. operates four business segments: Offshore and Marine, Infrastructure, Property and Investments.
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