Keppel Corporation (POEMS)

Hold (Maintained)

Closing Price S$10.30

Target Price S$12.16(+18.06%)

• Secures US$195mil. jack up order from Transocean

• Secures S$146 mil. FPSO-related jobs

• Maintain Hold with fair value unchanged at $12.16.

Another B class Secured

Keppel Corp announced last Friday evening that it has secured a US$195 mil. order to build the KFELS Super B Class Bigfoot jack up rig for Transocean. The order came from the exercise of one of the three options that was granted to Transocean on 17 February 2011.The rig is scheduled for delivery in 3Q2013.

The KFELS Super B Class Bigfoot rig is designed with larger spud cans to enable the unit to operate efficiently while minimizing potential leg penetration problems in soft soil conditions. The rig will be equipped with a 1.5 million pound drilling system and will have a maximum cantilever load of 3,200 kips. In addition, the rig will be capable of drilling at 75 feet outreach, allowing for coverage of a larger well pattern.

Keppel also recently announced that it has secured two offshore contracts worth S$146 mil. The first contract was awarded by Single Buoy Moorings Inc for the conversion of a VLCC into an FPSO with completion in 2Q013.The second contract was awarded by Rubicon Offshore for the fabrication and integration of an external thrust mooring system for an existing FPSO with completion in 4Q11.

The above contract wins have lifted Keppel Corp’s year-to-date orderbook and order wins to approx. S$9.5 bil and S$7.8 bil respectively. We also estimate that Keppel Corp now has 9 options left that is worth approx. S$2.6 bil.

Maintain Hold with fair value unchanged at $12.16

Keppel Corp share price has fallen 4.8% since our last report, in tandem with weak market conditions. As a result, its current share price now represents an 18% upside potential to our target price and within our band range of a BUY rating. However, we are keeping our Hold rating on Keppel Corp due to a substantial fall in oil prices (approx.13%) since our last report, which will have an impact on market sentiments. We also do not think that oil prices will be able to recover to above US$100/bbl level (WTI cushing) in the short run given the current market turmoil. Thus, we maintain our HOLD recommendation with an unchanged fair value of S$12.16.