Keppel - DBS Research 2024-08-02: Underappreciated Rate Cut Beneficiary

• Keppel (SGX:BN4)'s 1H24 core net profit, excluding losses for legacy O&M assets, broadly in line, with support from infrastructure earnings.

1H24 results a mixed bag but fundamentals are intact

• - Read this at SGinvestors.io -
• Looking beyond these noises, 1H24 core profit of S$513mil (+7% y-o-y; -5% h-o-h) was broadly in line, making up ~49% of our FY24 estimate.
• Integrated Power Operations remained the star performer, offsetting weakness in Real Estate. Connectivity was relatively steady.
• - Read this at SGinvestors.io -

Losses for Legacy O&M assets should narrow, if not reverse.

• Of the S$209m losses for Legacy O&M assets registered in 1H24, ~S$67m was attributable to Seatrium's share price decline (from ~S$2.40 as of end 2023 to S$1.40 as of end Jun-24). Keppel has a remainder of 1.37bn shares or ~2% stake in Seatrium (SGX:5E2) to encash. We find comfort that Seatrium's share price has since recovered to above the S$1.60 level.
• Floatel’s losses (~S$34m attributable to Keppel) was partly impacted by extra cost required to redeploy two vessels. Such losses should narrow or reverse in 2H with the booming chartering market.
• The remaining half of the losses was attributable to AssetCo Vendor Notes, which is a function of net interest and amortization charges. Management has stressed its priority to monetise these assets amidst robust demand.

Infrastructure earnings up 25% y-o-y to S$363mil in 1H24

• Read more at SGinvestors.io.

Pei Hwa HO DBS Group Research | https://www.dbs.com/insightsdirect/ 2024-08-02 SGinvestors.io

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