KEPPEL Corporation's second-quarter results were worse than expected and the challenges the Singapore rigbuilder faces are likely to persist, brokerage KGI Fraser said in a report on Friday.
However, it added that Keppel's diversified business could help it weather the storm.
Analyst Joel Ng said in the report that although Keppel had managed to win S$1.5 billion of new orders this year, bringing its net order book to S$11 billion, the bear cycle in oil markets was "far from being over".
And even though industry players have repeatedly called for a speedier retirement of older rigs, he noted there was still severe oversupply in the market for jack-up rigs and floaters, a key market for Keppel Offshore & Marine.
Upside catalysts are also dwindling, with a memorandum of understanding to develop and operate a US$400 million yard in Mexico having been put on hold, he added.
Mr Ng lowered his estimates for Keppel's new order wins to S$2 billion in FY2015 from S$4.5 billion-S$5 billion.
However, he said the conglomerate's diversified business model would help it offset the impact of the offshore slump.
"We like Keppel's attractive dividend yield (more than 5 per cent) and diversified business model to help tide it through this difficult period."
He maintained a "hold" rating and cut his target price from S$8.51 to S$8.44.