Why aggressive Chinese yards aren't scaring Keppel

Order book hit record high of US$13.1b.

According to Phillip Securities, they believe that Keppel Corp will continue to benefit from the robust O&M outlook, which is well-supported by high dayrates and utilizations for both jack-up and semi-sub rigs.

Albeit the Chinese yards have been aggressive in recent times by offering lower pricing and appealing payment terms, the analysts do not see this as a major concern to SG yards, which have strong track records, in the near-term.

Here's more from Phillip Securities:

Its net order book hit a record high of US$13.1bn as at end-March 2013, with deliveries extending into 2019, provides good earnings visibility.

YTD, Keppel Corp has secured orders worth US$3.1bn, which is on track to hit our FY13E forecast of US$5.9bn. We see upside potential in O&M margin to recover from 13.5% in 2012 to 15.8% in 2013, predominantly driven by the record delivery of 20 jack-up rigs in 2013 (5 already delivered in 1Q13), mostly based on its proprietary KFELS B Class design.

Furthermore, Keppel Corp’s strong dividend yield of ~4-5% is another key feature which investors should not ignore.

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