UOB KAYHIAN | CIMB |
Keppel Corp (KEP SP) Keppel’s Deal With Borr A Masterwork, Assuming A Forfeit By Transocean Borr announced a transaction of US$1.35b for Transocean’s jackup rigs, with Keppel simultaneously announcing that its newbuilds were transacted at a slight haircut of US$216m (original: US$219m). Assuming Transocean forfeited its deposit, valuations make more sense and display Keppel’s skill at negotiating despite its difficult position. The revised delivery sees a 0-1% earnings increase over 2017-18. Keppel remains a trading play. Revise target price to S$6.98, maintain HOLD. Entry price: S$6.25.
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China Jinjiang A hidden jewel in China’s waste treatment industry ■ CJE is the largest WTE operator in China but seems overlooked by investors. ■ A beneficiary of the government’s push for waste incineration. ■ 3-year EPS growth of 13.5% and dividend yield of 6.8% but only 7.3x FY17F P/E. ■ We initiate coverage with an Add rating and DCF-based target price of S$1.10. ■ Strong earnings growth and ongoing expansion of the WTE portfolio are catalysts
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OCBC | |
Keppel Corporation: Quality never goes out of style Keppel FELS has entered into a Heads of Agreement with Borr Drilling Limited whereby the construction contracts for five jackup rigs currently being built by Keppel FELS for Transocean will be novated to Borr Drilling. The price for each rig is USD$216m, compared to the original price of USD$219m, proof that well-regarded products still command good pricing in this tough environment. Borr Drilling will also make a down payment of USD$275m, such that Keppel would have obtained cash worth about half of the total contract value for the five units with the Borr payment. We are starting to see more instances of opportunistic purchases of rigs and expect that buying interest would be higher for best-in-class assets such as those with the Keppel and Sembmarine brand. Maintain BUY with S$7.40 fair value estimate on Keppel Corp.
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