Keppel Corporation

Asia Pacific Equity Research
23 January 2015
Neutral
Keppel Corporation
KPLM.SI, KEP SP
Price: S$8.10
From an O&M heavyweight to a well-diversified
conglomerate; time for a conglomerate discount?
Price Target: S$8.80
 Proposed privatization of Keppel Land by Keppel Corp at S$4.38-4.60
per share, 20-26% premium to current price: Earlier today, Keppel Corp
offered to buy out shareholders in Keppel Land Ltd. with the of aim taking
the company private. Keppel, which currently owns 54.6% of Keppel Land,
is offering S$4.38 to S$4.60 a share for Keppel Land’s remaining 45.4%
stake. Note that the higher price of S$4.60 would be extended if Keppel
Corp achieves the Compulsory Acquisition Threshold of 90% enabling the
privatization of Keppel Land. We estimate a consideration of S$3.1-3.2 bn.
 EPS, ROE, and NAV-accretive, as per management, but is it valuation
accretive? Not yet, in our view: While management flagged that the
proposed transaction would be accretive to EPS (by 14%), ROE (by
2.2%p/p), as well as NAV (by 4%), we do not believe it would be valuationaccretive given the premium paid for KPLD. However the increase of
gearing from 11% to 41% would be manageable, in our view. Given the far
more diversified portfolio rather than O&M-focused portfolio (after the
transaction), we believe a conglomerate discount would need to be applied.
If we impute the offer price of S$4.60 per share (which translates into a
22% discount to RNAV) into our SOTP along with a 10% conglomerate
discount, this would translate into a lowering of our valuation by S$0.30 per
share. Please see various scenarios we present in Table 2.
 Survival of the fittest; moving with the times: While we do see this move
into property (by KEP) as justifying a conglomerate discount and likely to
result in a shareholder shake-up (given bulk of shareholders in name were
largely O&M focused in our view), we also believe that given the tough
outlook for the Offshore & Marine segment (O&M), the move would
partially offset the emerging headwinds for this segment and enable
management to continue to focus on returns, efficient use of capital, and
dividends. We believe this move by management also confirms our concerns
about the tough outlook as highlighted in our January 8th, 2015 Singapore
Rig Builders note. Overall, while we see this as the right move for the longterm strategy of KEP, we do also see it as likely to weigh on the stock in
near term. Reiterate Neutral.
Keppel Corporation (Reuters: KPLM.SI, Bloomberg: KEP SP)
S$ in mn, year-end Dec
FY12A
FY13A
FY14A
Revenue (S$ mn)
13,965
12,380
13,283
Core Profit (S$ mn)
1,914
1,412
1,311
Core EPS (S$)
1.06
0.78
0.73
Core EPS growth (%)
27.4%
(26.7%)
(7.2%)
DPS (S$)
0.45
0.50
0.48
P/E (Recurring)
7.6
10.4
11.2
P/BV (x)
1.6
1.5
1.4
ROE (%)
22.6%
14.9%
13.1%
Div Yield
5.6%
6.1%
5.9%
Source: Company data, Bloomberg, J.P. Morgan estimates.
FY15E
12,706
1,385
0.77
5.7%
0.50
10.6
1.3
13.0%
6.1%
FY16E
12,933
1,491
0.82
7.6%
0.50
9.8
1.3
13.1%
6.1%
Singapore
Conglomerates & Multi-industry
Ajay Mirchandani
AC
(65) 6882-2419
[email protected]
Bloomberg JPMA MIRCHANDANI <GO>
J.P. Morgan Securities Singapore Private
Limited
Mayank Choudhary
(91-22) 6157-5083
[email protected]
J.P. Morgan India Private Limited
Price Performance
11.5
10.5
S$
9.5
8.5
7.5
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
KPLM.SI share price (S$)
FTSTI (rebased)
Abs
Rel
YTD
-8.6%
-7.5%
1m
-5.8%
-7.5%
Company Data
Shares O/S (mn)
Market Cap (S$ mn)
Market Cap ($ mn)
Price (S$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (S$ mn)
FTSTI
Exchange Rate
Price Target End Date
Price Target (S$)
3m
-15.7%
-20.5%
12m
-26.0%
-32.6%
1,807
14,641
10,968
8.10
20 Jan 15
6.54
56.99
3334.02
1.33
31-Dec-15
8.80
See page 9 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
23 January 2015
Ajay Mirchandani
(65) 6882-2419
[email protected]
Key catalysts for the stock price:
• Closure of privatization bid for KPLD
• Macro oil price environment
Upside risks to our view:
• Higher-than-expected margins
Key financial metrics
Revenues (S$ mn)
Revenue growth (%)
EBITDA (S$ mn)
EBITDA margin (%)
Tax rate (%)
Net profit (S$ mn)
EPS (S$ )
EPS growth (%)
DPS (S$)
BVPS (S$)
Operating cash flow (S$ mn)
Free cash flow (S$ mn)
Interest cover (X)
Net margin (%)
Sales/assets (X)
Debt/equity (%)
Net debt/equity (%)
ROE (%)
Key model assumptions
Order wins (S$ mn)
O&M EBIT Margin %)
FY14A
13,283
7%
2,639
20%
16%
1,311
0.73
-7%
0.48
5.74
22
898
17.7
14%
0.43
50%
-11%
13%
FY14A
5000
14.3%
FY13A
12,380
-11%
2,377
19%
14%
1,412
0.78
-26%
0.50
5.37
625
(53)
17.1
15%
0.42
52%
-11%
15%
FY13A
7034
14.7%
FY15E
12,706
-4%
2,171
17%
8%
1,385
0.77
6%
0.50
6.08
4,099
3,622
8.4
12%
0.39
46%
net cash
13%
FY15E
5500
14.7%
FY16E
12,933
2%
2,172
17%
8%
1,491
0.82
8%
0.50
6.48
2,555
2,070
8.4
12%
0.38
43%
net cash
13%
FY16E
3000
14.6%
Source: Bloomberg, Company and J.P. Morgan estimates.
Sensitivity analysis
Sensitivity to
5% chg in O&M sales
Downside risks to our view:
• Further drop in oil prices
• Worse-than-expected margins
• Lower-than-expected order wins
Valuation and price target basis
Our Dec-15 PT of S$8.80 is based on our sum-of-the-parts valuation
with a DCF-based calculation for the rig-building business and a 6x P/E
for ship repair and other businesses. This is in line with the historical
average for the repair business. We value property (Keppel Bay) at NAV
and Keppel Land at our PT. Finally, we value the infrastructure business
at 1.5x book.
SOTP valuation
Market valuation of listed entities (ex-property)
DCF valuation of Offshore & Marine
DCF valuation of existing orderbook only
Business value of offshore-conversion
Ship repair & others
0.75
3.84
0.89
2.34
0.61
DCF valuation of Infrastructure business (ex-Kep T&T)
Keppel Bay / Other property assets
Keppel Land
K-REIT
Less: Net cash/ (debt) -- at O&M level
Fair value of Keppel Corp
Price target
0.66
0.71
1.63
0.63
0.65
8.88
8.80
Source: J.P. Morgan estimates.
O&M EBIT
FY15E
FY16E
5%
5%
EPS
FY15E
FY16E
2.7%
2.6%
Source: Bloomberg, Company and J.P. Morgan estimates.
JPMe vs. consensus, change in estimates
Net Income
FY15E
JPMe old
1,385
JPMe new
1,385
% chg
0%
Consensus
1,569
FY16E
1,491
1,491
0%
1,558
Source: Bloomberg, J.P. Morgan.
Table 1: Valuation comparison
Company
Singapore
Ezion
Dyna-Mac
Keppel
Ezra
COSCO
SMM
Malaysia
SapuraKen
cana
Dialog
UMWOG
Perisai
Bumi
MMHE
Mkt Cap
(US$ mn)
Price
(LC)
FY15E
P/E
FY16E
FY15E
1,347
245
11,485
430
997
4,894
1.27
0.33
8.10
0.55
0.51
3.10
5.8x
8.9x
10.6x
11.7x
22.6x
12.6x
5.2x
8.1x
9.8x
8.5x
19.5x
13.1x
1.2x
1.5x
1.4x
0.4x
0.8x
2.1x
4,073
2,088
1,524
152
1,977
629
2.80
1.62
2.75
0.51
1.25
1.42
10.8x
37.1x
14.1x
6.1x
14.9x
13.6x
10.2x
31.1x
12.0x
3.9x
12.2x
13.2x
1.3x
4.7x
1.8x
0.5x
1.0x
0.8x
P/B
FY16E
Dividend Yield
FY15E
FY16E
FY15E
ROE
FY16E
0.9x
1.4x
1.3x
0.3x
0.8x
2.0x
0.2%
6.2%
6.2%
0.0%
2.0%
4.8%
0.0%
6.2%
6.2%
0.0%
2.0%
4.6%
22.1%
17.7%
13.2%
3.2%
3.7%
17.2%
19.9%
17.7%
13.3%
4.2%
4.2%
15.5%
69.9%
net cash
net cash
113.1%
79.1%
net cash
54.5%
net cash
net cash
110.7%
73.1%
net cash
1.2x
4.3x
1.6x
0.4x
1.0x
0.8x
0.9%
1.4%
1.4%
0.0%
1.3%
1.5%
1.0%
1.7%
1.7%
0.0%
1.6%
1.5%
12.7%
13.7%
13.0%
8.7%
7.2%
6.0%
12.1%
14.9%
13.8%
12.3%
8.2%
5.9%
101.1%
32.1%
22.9%
105.4%
49.8%
net cash
77.5%
31.5%
20.2%
127.0%
62.1%
net cash
Source: J.P. Morgan estimates, as of 22 Jan 2015. *SAKP’s Year end is Jan. 15E and 16E represents Year end of Jan 16 and Jan 17 respectively; Dialog year end is June
2
Net Gearing
FY15E
FY16E
Ajay Mirchandani
(65) 6882-2419
[email protected]
Asia Pacific Equity Research
23 January 2015
Sensitivity of SOTP on conglomerate & RNAV discount
While our current valuation of S$8.8 per share (S$16 billion) is based on an RNAV
discount of 40% for Keppel Land’s portfolio (for 54.6%) and zero conglomerate
discount, we present below the valuation range based on differing conglomerate
discounts and discounts to RNAV assuming that KPLD is fully privatized.
Table 2: Sensitivity of our SOTP to conglomerate discount and discount to RNAV for KPLD
S$ per share
RNAV discount
10%
20%
30%
40%
0%
10.0
9.5
9.0
8.5
Conglomerate discount
10%
15%
20%
9.0
8.5
8.0
8.5
8.1
7.6
8.1
7.6
7.2
7.6
7.2
6.8
25%
7.5
7.1
6.7
6.4
Source: JPMorgan estimates
Transaction summary
Proposed privatization of Keppel Land
Earlier today, Keppel Corp offered to buy out shareholders in Keppel Land Ltd. with
an aim to take the company private. Keppel, which currently owns 54.6% of Keppel
Land (KLL), is offering S$4.38 to S$4.60 a share for Keppel Land’s remaining
45.4%stake. This translates into a premium of 25% and 31% respectively to one
month VWAP. Note the higher price of S$4.60 would be extended if Keppel Corp
achieves Compulsory Acquisition Threshold of 90% enabling privatization of
Keppel Land. Based on the higher offer price, maximum aggregate consideration of
the offer would be S$3.6 billion assuming full acceptance of offer and 782 million
Keppel Land shares (includes 74 million convertible bond related shares in our
view). Purely considering the residual 45.4% Keppel Land stake (held by
minorities), we estimate a consideration of S$3.1-3.2 billion.
A combination of internal cash resources and borrowings of Keppel will be used to
fund the offer amount. Keppel also confirmed that no downstream offer will be
required for Keppel REIT and Keppel Philippines Properties, in which KLL and its
subsidiaries have 45.1% and 51% interest respectively.
Keppel Corporation sees transaction as NAV, EPS and ROE accretive
Keppel announced that the offer would be accretive to group’s NAV, EPS and ROE.
On a pro forma basis, group’s NAV would increase by 4% from S$10.38 billion to
S$10.77 billion by privatizing Keppel Land.
Figure 1: Keppel: FY14 NAV
10.8
FY14 NAV (S$b)
10.6
10.4
10.38
10.77
+4%
10.2
10
Keppel Corp
Keppel Corp. (pro forma - incl. 100% stake in Keppel
Land)
FY14 NAV (S$b)
Source: Company
3
Ajay Mirchandani
(65) 6882-2419
[email protected]
Asia Pacific Equity Research
23 January 2015
Figure 2: Keppel: FY14 net profit
2200
FY14 Net Profit (S$m)
2149
2100
+14%
2000
1885
1900
1800
1700
Keppel Corp
Keppel Corp. (pro forma - incl. 100% stake in Keppel
Land)
FY14 Net Profit (S$m)
Source: Company
Further net profit will be up by 14% from S$1.9 billion to S$2.1 billion, EPS up by
13% from 1.04 to 1.18 and ROE up by 12% from 18.8% to 21.0% (all on a pro forma
basis).
Figure 3: Keppel: FY14 EPS
1.2
FY14 EPS
1.18
1.15
+13%
1.1
1.05
1.04
1
0.95
Keppel Corp
Keppel Corp. (pro forma - incl. 100% stake in Keppel
Land)
FY14 EPS
Source: Company
Figure 4: Keppel: FY14 ROE
22.00%
FY14 ROE
21.00%
+12%
20.00%
19.00%
21.00%
18.80%
18.00%
17.00%
Keppel Corp
Keppel Corp. (pro forma - incl. 100% stake in Keppel
Land)
FY14 ROE
Source: Company
4
Ajay Mirchandani
(65) 6882-2419
[email protected]
Asia Pacific Equity Research
23 January 2015
Figure 5: Segmental net profit (before transaction)
Figure 6: Segmental net profit (after transaction)
S$ millions
S$ millions
FY14 Net Profit S$m
S$43m, 2%
FY14 Net Profit S$m
S$43m, 2%
S$482m, 26%
S$1040m, 48%
S$746m, 35%
S$1040m, 55%
S$320m, 17%
Offshore & Marine
Source: Company
S$m320, 15%
Infrastructure
Property
Investments
Offshore & Marine
Infrastructure
Property
Investments
Source: Company
Rationale for the deal
Keppel sees the property business as strong with positive long-term fundamentals
expecting a huge growth in urbanization in Asia in the next 15 years. Keppel
believes that investment opportunities exist in the property business with China and
Singapore as its core markets, and Vietnam and Indonesia as its growth markets.
Further rationale for the transaction seems to be the opportunity to realize potential
synergies across three core businesses leveraging financial and organizational
strengths of the group. Moving forward Keppel sees increase collaboration among
these core businesses through development of data centers, integrated townships,
district cooling and heating systems. Keppel Land can be supported financially
through diversified earnings streams of Keppel Corp.
Quick comments from our Keppel Land, property analyst Brandon Lee
The base offer price of S$4.38/share, which represents a 20% premium to last
closing price of S$3.65, 11.6% discount to FY14 book value of S$4.95, 25.3%
discount to RNAV and 25.1% premium to our PT of S$3.50. Should KEP acquire
KPLD’s shares or receive acceptances entitling it to exercise its rights of compulsory
acquisition, the offer price will be adjusted upwards to S$4.60/share, which
represents a 26% premium to last closing price of S$3.65, 7.2% discount to FY14
book value of S$4.95, 21.5% discount to RNAV and 31.4% premium to our PT of
S$3.50. KEP’s offer price of S$4.38/4.60 represents a 25.3%/21.5% discount to our
RNAV of S$5.86, which is lower than KPLD’s historical RNAV discount of 26%.
5
Ajay Mirchandani
(65) 6882-2419
[email protected]
Asia Pacific Equity Research
23 January 2015
Investment Thesis, Valuation and Risks
Keppel Corporation (Neutral; Price Target: S$8.80)
Investment Thesis
We are Neutral on Keppel, as we remain cautious about the macro environment
given weak oil prices, falling E&P capex trends and rising deliveries of Jack-ups.
However, among the Singapore rig builders, Keppel is our preferred pick due to: (1)
better O&M margins forecasted over the next one to two years, as Brazil will act as
baseload; (2) product mix, as Keppel enjoys orders in the FLNG market; (3) potential
drillship/FLNG orders; and (4) orders expected from Mexico as it sets up a yard.
Valuation
Our Dec-15 PT of S$8.80 is based on our sum-of-the-parts valuation with a DCFbased calculation for the rig-building business and a 6x P/E for the ship repair and
other businesses, in line with the historical average for the repair business. We value
property (Keppel Bay) at NAV and Keppel Land at our PT. Finally, we value the
infrastructure business at 1.5x book.
Listed entities:
Stake
Price/Factor
Valuation
Keppel Telecommunications & Transportation
k1 Venture
K-Green Trust
KrisEnergy
Market valuation of listed entities (ex-property)
DCF valuation of Offshore & Marine
DCF valuation of existing order book only
Business value of offshore-conversion
Ship repair & others
DCF valuation of Infrastructure business (ex-Kep T&T)
DCF valuation of Keppel Bay property project
Keppel Land
K-REIT
80%
36%
49.9%
31.4%
1.49
0.187
1.075
0.65
55%
29%
1.5
0%
0%
1.20
662
146
338
212
1,357
6,965
1,619
4,242
1,103
1,199
1,289
2956
1,133
Net cash/ (debt) -- (excluding cash advances) at O&M
Fair value of Keppel Corp
Price target
1,184
16,082
Per share
(S$)
0.37
0.08
0.19
0.12
0.75
3.84
0.89
2.34
0.61
0.66
0.71
1.63
0.63
0.65
8.88
8.80
Source: J.P. Morgan estimates.
Risks to Rating and Price Target
The upside/downside key risks to our rating and PT include a better- /worse-thanexpected delay in new orders, a steep rise/further collapse in oil prices and better- /
worse-than-expected operating margins.
6
Asia Pacific Equity Research
23 January 2015
Ajay Mirchandani
(65) 6882-2419
[email protected]
JPM Q-Profile
Keppel Corporation Limited (SINGAPORE / Industrials)
As Of: 23-Jan-2015
[email protected]
Local Share Price
Current:
8.10
12 Mth Forward EPS
16.00
1.20
14.00
1.00
12.00
0.80
10.00
Current:
0.89
0.60
8.00
0.40
6.00
0.20
4.00
2.00
0.00
Current:
9.1x
25.0x
Current:
Aug/14
Apr/13
Dec/13
Aug/12
Apr/11
P/E Relative to Singapore Index
Dec/11
Aug/10
Apr/09
Dec/09
Aug/08
Apr/07
Dec/07
Aug/06
Apr/05
Dec/05
Aug/04
Apr/03
Dec/03
Aug/02
Apr/01
Dec/01
Aug/00
-0.20
Dec/99
Dec/14
Jun/13
Mar/14
Sep/12
Dec/11
Jun/10
PE (1Yr Forward)
Mar/11
Sep/09
Dec/08
Jun/07
Mar/08
Sep/06
Dec/05
Jun/04
Mar/05
Sep/03
Dec/02
Jun/01
Mar/02
Sep/00
Dec/99
0.00
0.67
1.60
1.40
20.0x
1.20
1.00
15.0x
0.80
10.0x
0.60
0.40
5.0x
0.20
ROE (Trailing)
Current:
19.34
35.00
Aug/14
Dec/13
Apr/13
Aug/12
Dec/11
Apr/11
Aug/10
Dec/09
Apr/09
Aug/08
Dec/07
Apr/07
Aug/06
Dec/05
Apr/05
Aug/04
Dec/03
Apr/03
Dec/01
Aug/02
Current:
P/B Trailing
Aug/14
Dec/13
Apr/13
Aug/12
Dec/11
Apr/11
Aug/10
Dec/09
Apr/09
Aug/08
Dec/07
Apr/07
Aug/06
Apr/05
Price/Book (Value)
6.0x
30.00
Dec/05
Aug/04
Dec/03
Apr/03
Aug/02
Dec/99
Aug/14
Dec/13
Apr/13
Aug/12
Dec/11
Apr/11
Aug/10
Dec/09
Apr/09
Aug/08
Dec/07
Apr/07
0.0
Aug/06
1.0
0%
Dec/05
2.0
2%
Apr/05
3.0
4%
Aug/04
4.0
6%
Dec/03
5.0
8%
Apr/03
6.0
10%
Aug/02
7.0
12%
Dec/01
4.75
9.0
8.0
Apr/01
Current:
10.0
14%
Aug/00
Apr/01
Dividend Yield (Trailing)
16%
Dec/99
Aug/00
Aug/14
Dec/13
Aug/12
Apr/11
Apr/13
11%
Dec/01
18%
Current:
Singapore BY
Apr/01
12Mth fwd EY
Proxy
Aug/00
20%
Dec/11
Aug/10
Dec/09
Apr/09
Aug/08
Dec/07
Apr/07
Aug/06
Dec/05
Apr/05
Aug/04
Dec/03
Apr/03
Aug/02
Dec/01
Apr/01
Aug/00
Dec/99
Earnings Yield (& Local Bond Yield)
Dec/99
0.00
0.0x
1.5x
P/B Forward
5.0x
25.00
4.0x
20.00
3.0x
10.00
2.0x
5.00
1.0x
Aug/14
Dec/13
Apr/13
Aug/12
Dec/11
Apr/11
Aug/10
Dec/09
Apr/09
Aug/08
Dec/07
Apr/07
Aug/06
Dec/05
Apr/05
Aug/04
Dec/03
Apr/03
Aug/02
Dec/01
Apr/01
0.0x
Dec/99
Aug/14
Dec/13
Apr/13
Aug/12
Apr/11
Dec/11
Aug/10
Dec/09
Apr/09
Aug/08
Dec/07
Apr/07
Aug/06
Dec/05
Apr/05
Aug/04
Dec/03
Apr/03
Aug/02
Dec/01
Apr/01
Aug/00
Dec/99
0.00
Aug/00
15.00
Summary
Keppel Corporation Limited
SINGAPORE
Industrials
12mth Forward PE
P/BV (Trailing)
Dividend Yield (Trailing)
ROE (Trailing)
11000.81
40.58956 TICKER KEP SP
Industrial Conglomerates
Latest
Min
Max
5.64
19.26
9.13x
1.46
0.74
5.03
4.75x
0.78
8.95
19.34
4.54
33.06
Median
12.27
2.12
3.79
19.34
Average
12.21
2.14
3.57
18.69
2 S.D.+
17.62
3.97
6.30
33.38
2 S.D. 6.81
0.32
0.83
3.99
% to Min
-38%
-50%
-83%
-77%
23-Jan-15
As Of:
Local Price:
8.10
EPS:
0.89
% to Max % to Med % to Avg
111%
34%
34%
243%
45%
46%
89%
-20%
-25%
71%
0%
-3%
Source: Bloomberg, Reuters Global Fundamentals, IBES CONSENSUS, JPMorgan Quantitative & Derivative Strategy
7
Ajay Mirchandani
(65) 6882-2419
[email protected]
Asia Pacific Equity Research
23 January 2015
Keppel Corporation: Summary of Financials
Income Statement
S$ in millions, year end Dec
FY13
FY14
Revenues
12,380 13,283
EBITDA
2,377
2,639
% change Y/Y
(16.1%) 11.0%
EBITDA Margin
19.2% 19.9%
EBIT
2,134
2,373
% change Y/Y
(18.6%) 11.2%
EBIT Margin
17.2% 17.9%
Net Interest
19
(1)
Associates
626
504
Exceptionals
(434)
(574)
Earnings before tax
2,794
2,889
% change Y/Y
(14.2%)
3.4%
Tax
(397)
(462)
as % of EBT
14.2% 16.0%
Minority Interests
(551)
(541)
Net income (reported)
1,846
1,885
Net income (recurring)
1,412
1,311
Shares outstanding
1,808
1,808
EPS (Recurring)
0.78
0.73
EPS (reported)
1.02
1.04
Balance sheet
S$ in millions, year end Dec
FY13
FY14
Cash and cash equivalents
5,565
5,736
Accounts receivable
1,916
2,510
Inventories
8,995 10,681
Others
1,482
2,261
Current assets
17,957 21,187
LT investments
2,453
2,346
Net fixed assets
3,798
2,673
Total Assets
30,056 31,555
Short-term loans
517
1,796
Payables
5,409
5,581
Total current liabilities
9,342 10,974
Long-term debt
6,583
5,587
Other liabilities
442
266
Total Liabilities
16,367 16,827
Shareholders' equity
9,701 10,381
Total Liabilities and equity
30,056 31,555
BVPS
5.37
5.74
Net Debt
1,535
1,647
Source: Company reports and J.P. Morgan estimates.
8
FY15E
12,706
2,171
(17.7%)
17.1%
1,862
(21.5%)
14.7%
(164)
464
(124)
2,305
(20.2%)
(193)
8.4%
(603)
1,509
1,385
1,808
0.77
0.83
FY16E
12,933
2,172
0.1%
16.8%
1,856
(0.3%)
14.4%
(137)
390
(120)
2,247
(2.5%)
(187)
8.3%
(449)
1,611
1,491
1,808
0.82
0.89
FY15E
8,463
2,269
8,471
2,261
21,464
2,346
4,027
33,185
1,796
6,353
11,387
5,587
266
17,240
10,995
33,185
6.08
(1,081)
FY16E
9,639
2,309
8,622
2,261
22,831
2,346
4,195
34,721
1,796
6,466
11,757
5,587
266
17,610
11,711
34,721
6.48
(2,256)
Cash flow statement
S$ in millions, year end Dec
EBIT
Depreciation & amortization
Change in working capital
Other non-cash items
Cash flow from operations
FY13
2,134
242
(734)
(458)
625
FY14
2,373
265
(1,762)
(526)
22
FY15E
1,862
308
1,678
607
4,099
FY16E
1,856
316
179
528
2,555
Capex
Disposal/(purchase)
Cash flow from investments
Equity raised/(repaid)
Debt raised/(repaid)
Other
Dividends paid
Cash flow from financing
Net change in cash
Beginning cash
Ending cash
(903)
(678)
40
2,130
253
(895)
1,528
1,509
4,055
5,564
(595)
877
34
272
(207)
(868)
(769)
172
5,565
5,736
(476)
(476)
0
0
0
(895)
(895)
2,727
5,736
8,463
(485)
(485)
0
0
0
(895)
(895)
1,175
8,463
9,639
Free cash flow
DPS
Ratio Analysis
S$ in millions, year end Dec
Gross margin
EBITDA margin
EBIT margin
Net margin
(295)
0.50
(572)
0.48
3,773
0.50
2,196
0.50
FY13
19.2%
17.2%
11.4%
FY14
19.9%
17.9%
9.9%
FY15E
17.1%
14.7%
10.9%
FY16E
16.8%
14.4%
11.5%
(11.3%)
(18.6%)
(17.5%)
(26.7%)
7.3%
11.2%
2.1%
(7.2%)
(4.3%)
(21.5%)
(19.9%)
5.7%
1.8%
(0.3%)
6.7%
7.6%
NM
11.2%
2,868.0
11.2%
13.2
(6.8%)
15.9
(13.2%)
41.8%
312.6%
14.9%
11.0%
43.1%
306.8%
13.1%
11.5%
39.3%
302.9%
13.0%
9.4%
38.1%
299.1%
13.1%
9.1%
Sales growth
EBIT growth
Net profit growth
EPS growth
Interest coverage (x)
Net debt to equity
Sales/assets
Assets/equity
ROE
ROCE
Ajay Mirchandani
(65) 6882-2419
[email protected]
Asia Pacific Equity Research
23 January 2015
Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research
analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document
individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views
expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of
any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views
expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per
KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or
intervention.
Important Disclosures


Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Keppel Corporation.
Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following
company(ies) as clients, and the services provided were non-investment-banking, securities-related: Keppel Corporation.

Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services
other than investment banking from Keppel Corporation.
Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for
compendium reports and all J.P. Morgan–covered companies by visiting https://jpmm.com/research/disclosures, calling 1-800-477-0406,
or e-mailing [email protected] with your request. J.P. Morgan’s Strategy, Technical, and Quantitative
Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-4770406 or e-mail [email protected].
Keppel Corporation (KPLM.SI, KEP SP) Price Chart
28
OW S$10.28
OW S$9.5OW S$11
OW S$14.1 OW S$12.4
OW S$16.5
21OW S$10.09
OW S$7N S$7.9OW S$9.7
OW S$11.4 OW S$12.8
OW S$13.3
Date
Rating Share Price Price Target
(S$)
(S$)
18-Oct-06
OW
7.56
9.28
24-Jan-07
OW
8.79
10.09
06-Mar-07 OW
8.35
10.28
26-Apr-07
OW
10.72
11.62
11-Jun-07
OW
11.40
16.50
28-Sep-07 OW
14.40
17.00
31-Mar-08 OW
10.00
16.00
19-Sep-08 OW
8.70
12.00
OW
4.17
7.00
N
5.75
5.75
26-May-09 N
7.30
7.90
24-Jul-09
OW
7.83
9.50
23-Oct-09
OW
8.15
9.70
26-Jan-10
OW
8.09
9.70
14-Apr-10
OW
9.42
11.00
16-Jul-10
OW
8.80
10.20
22-Oct-10
OW
9.65
11.40
17-Jan-11
OW
11.58
14.10
04-Apr-11
OW
12.70
15.10
20-Jul-11
OW
10.62
13.70
21-Oct-11
OW
8.78
12.80
07-Jan-12
OW
9.44
12.40
26-Jan-12
OW
10.76
12.70
13-Apr-12
OW
11.02
13.30
13-Jan-14
OW
10.98
13.50
22-Oct-14
OW
9.61
13.00
08-Jan-15
N
8.35
8.80
N S$8.8 23-Oct-08
04-Apr-09
OW S$9.285
OW S$11.62
OW S$17
OW S$16
OW S$12
N S$5.75
OW S$9.7
OW S$10.2
OWOW
S$15.1
S$13.7
OW S$12.7
Price(S$)
OW S$13.5OW S$13
14
7
0
Oct
06
Apr
08
Oct
09
Apr
11
Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
Initiated coverage Oct 18, 2006.
Oct
12
Apr
14
The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire
period.
J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated
9
Ajay Mirchandani
(65) 6882-2419
[email protected]
Asia Pacific Equity Research
23 January 2015
Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe:
J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if
applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy
reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a
recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stock’s expected total return is
compared to the expected total return of a benchmark country market index, not to those analysts’ coverage universe. If it does not appear
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website, www.jpmorganmarkets.com.
Coverage Universe: Mirchandani, Ajay: Aboitiz Power (AP.PS), Bumi Armada Berhad (BUAB.KL), COSCO Corporation (COSC.SI),
DMCI Holdings (DMC.PS), Dialog Group Bhd (DIAL.KL), Dyna-Mac Holdings Ltd (DMHL.SI), Electricity Generating Company
(EGCO.BK), Energy Development (EDC) Corporation (EDC.PS), Ezion Holdings Ltd (EZHL.SI), Ezra Holdings Ltd (EZRA.SI),
Glencore International PLC (0805.HK), Glow Energy (GLOW.BK), Icon Offshore Berhad (ICON.KL), Keppel Corporation (KPLM.SI),
Linc Energy Ltd (LINC.SI), Malaysia Marine and Heavy Engineering Holdings Bhd (MHEB.KL), Manila Electric Company (MER.PS),
Manila Water Company Inc (MWC.PS), Metro Pacific Investments Corp. (MPI.PS), PACC Offshore Services Holdings Ltd (PACC.SI),
Pacific Radiance Ltd. (PACI.SI), Perisai Petroleum Teknologi Bhd (PPTB.KL), Ratchaburi Electricity Generating Holding (RATC.BK),
SapuraKencana Petroleum Bhd (SKPE.KL), Sembcorp Marine (SCMN.SI), Semirara Mining Corp (SCC.PS), Tenaga (TENA.KL),
UMW Oil & Gas Corp Bhd (UMOG.KL), Vard Holdings Ltd (VARD.SI), YTL Power (YTLP.KL)
J.P. Morgan Equity Research Ratings Distribution, as of January 1, 2015
J.P. Morgan Global Equity Research Coverage
IB clients*
JPMS Equity Research Coverage
IB clients*
Overweight
(buy)
45%
56%
45%
75%
Neutral
(hold)
43%
49%
48%
67%
Underweight
(sell)
12%
33%
7%
52%
*Percentage of investment banking clients in each rating category.
For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold
rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table
above.
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10
Ajay Mirchandani
(65) 6882-2419
[email protected]
Asia Pacific Equity Research
23 January 2015
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11
Ajay Mirchandani
(65) 6882-2419
[email protected]
Asia Pacific Equity Research
23 January 2015
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