Keppel Corporation - DBS Research 2022-04-22: 1Q22 Improved Performance Across All Segments Except Urban Development

Keppel Corporation - 1Q22 Improved Performance Across All Segments Except Urban Development

  • Keppel Corp (SGX:BN4)'s 1Q22 net profit was higher y-o-y, improvement seen across segments except Urban Development. 1Q22 revenue grew 9.5% y-o-y to S$2,068m during the quarter. Net gearing was stable at around 0.7x as of end Mar.
    • Keppel O&M net loss reduced significantly and was EBITDA positive. OpCo (shipyard business that will be merged with Sembcorp Marine (SGX:S51)) was profitable. Orderbook declined slightly to S$4.8bn (vs S$5.1bn as of end 2021). It is actively pursuing bareboat charters for its legacy rigs and receiving sales enquiries as well. Keppel Corp is confident of substantially monetizing its legacy rigs in the next 3-5 years.
    • Yard combination. Keppel Corp and Sembcorp Marine are expected to reach a definitive agreement on yard combination by end Apr. We await details on valuation of the shipyards and integration plans, before reviewing our valuation on Keppel.
    • Keppel Infrastructure’s net profit improved strongly y-o-y. It is gaining traction in renewables, clean energy & decarbonization solutions. It completed a feasibility study on carbon capture integration for Runcorn EfW facility in the UK. It will also be participating in the Energy Market Authority (EMA)’s Request for Proposal (RFP) for low-carbon power import licenses in Singapore.
    • Keppel Land’s net profit was lower y-o-y due to a drop in contribution from China property trading and absence of enbloc sales. Home sales dropped 60% y-o-y to 540 units in 3Q22, as new launches are slated for later this year. For the China market, underlying demand, especially at Keppel Corp’s core markets, remains fairly strong.
    • Keppel Capital – Asset management fees surged 69% y-o-y to S$71m in 1Q22. It has successfully completed over S$2.5bn in acquisitions during the quarter.
    • M1’s earnings were higher y-o-y in 1Q22; improving roaming and prepaid business outlook with reopening of borders.

Keppel Corp - Valuation:

  • SOTP-based target price of S$6.90 for Keppel Corp implies 1.05x FY22F P/BV, which is 0.5 standard deviation below its 5-year mean. Our target price is derived based on:
    1. Urban development valued at 0.9x P/BV, implying 25% discount to property RNAV;
    2. DCF valuation for Tianjin Eco-city with 10% WACC; and
    3. connectivity/asset investment/infrastructure/others at 1x P/BV.

Where we differ:

  • Keppel Corp’s huge landbank of ~5m sqm is held at low cost. Half of this is under development, progressively unlocking its RNAV over the next three to five years. Of the undeveloped landbank, 30% is earmarked for projects in Tianjin Eco-city, which is not reflected in our RNAV.

Above is the excerpt from report by DBS Group Research.
Clients of DBS may access the full report in PDF @

Pei Hwa HO DBS Group Research | 2022-04-22
SGX Stock Analyst Report BUY MAINTAIN BUY 6.900 SAME 6.900

Previous report by DBS Research:
2022-01-28 Keppel Corporation - All Stars Are Aligned

Target prices by 3 other brokers at Keppel Corp Target Prices.
Listing of broker reports at Keppel Corp Analyst Report.

Relevant links:
Keppel Corp Share Price History,
Keppel Corp Announcements,
Keppel Corp Dividends & Corp Actions,
Keppel Corp News Articles


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