LAST CLOSE: S$1.22
FAIR VALUE: S$1.55
Keppel T&T (KPTT) is a leading player in the logistics and data centre here and in the region. It has built up an extensive logistics presence with experience in supply chain management, IT knowledge and industry know-how and tailormade supply chain solutions.
Keppel Logistics (KL) is expected to benefit from the growing Asian trade and consumption especially from China. The demand for logistics outsourcing and third party logistics is also expected to be strong. KL will ride on the trend and scale up and expand on its logistics warehousing. It is building up its warehouse capacity here and in China where the logistics demand from outsourcing will fuel the growth in this business segment.
The demand for data centre is driven by the growing data and internet usage, and corporate IT outsourcing. The government initiative to provide the next generation national broadband service will also position Singapore as the information communication and data storage hub. KPTT is the top 5 player here serving the financial institutions and government agencies.
KPTT has also invested in Securus Data Property Fund last year with fund size of US$100 million. The fund will invest in data centres in Asia Pacific and Europe. With the growing need for data centres, the fund will look at investing in green design centres for more efficient power consumption and energy cost reduction.
We have forecast profit growth of about 20% for KPTT over the next 2 years. On valuation, the PER is 9.5x (2011) and 8.3x (2012), below the average PER of about 11x for listed comparable logistics companies here. There are no listed players with significant exposure to the data centre business here although the local telcos also provide this service as part of their telecommunication services.
We have a buy recommendation for KPTT based on a fair valuation of $1.55 for the company and an indicative PER of 12x.
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