Keppel

Keppel Corporation: Results in line; firm operating margins
Keppel Corporation (KEP) reported a 35.3% YoY decrease in revenue to S$2.76b and a 52.5% drop in net profit to S$357.0m in 1QFY13. However, net profit in 1QFY12 was bumped up by lumpy contributions from Reflections at Keppel Bay. Excluding Reflections, we estimate revenue fell by about 7% YoY while net profit slipped 16%. Results were within our expectations. The O&M division turned in a good operating margin of 14.1%, and management is pleased with the performance. Encouragingly, management “does not necessarily expect” margins to fall when the profit recognition of its Sete Brasil semi-subs kicks in. Meanwhile, the group is still seeing “strong market interest” in its core products. YTD, new order flow of about S$2.2b is also in line with our expectations. MaintainBUY with S$12.68 fair value estimate. (Low Pei Han)