Keppel Corporation

Keppel Corporation | Add

Target price: $10.00

April 3 close: $7.73

Broker: CGSCIMB, April 2

Keppel Land China will recognise around $270 million of gain from divestment of 100 per cent stake in Keppel China Marina Holdings after clearing objections by a minority shareholder.

We expect Q1 2018 earnings to be supported by the gain.

Offshore and marine may reach almost break-even without kitchen-sinking provisions. Catalysts ahead include:

1) a successful sale of delayed rigs to unlock working capital; and

2) higher dividend potential from more asset recycling in the property division.

The stock is cheap at 1.1 times its estimated FY18 price to book value, below its 20-year average of 1.7 times.

We believe ROE bottomed in FY17 and is set to recover on minimal capital expenditure and earnings growth.

Risks could come from noises from litigation.

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