Brokers' take

Keppel Corporation > Hold Target price: S$6.79 Oct 19 close: S$6.64 UOB Kay Hian, Oct 19

Keppel reported Q3 2018 core net profit that was significantly below expectations. Of the S$226 million headline net profit, S$162 million comprised one-off gains. O&M returned a profit, helped by a one-off catch-up recognition of interest income. The weakness in property continued into Q3 2018. Investments saw higher expenses from new initiatives dent profitability.

Our concerns about the headwinds facing the property business were not unfounded. Earnings from the key property segment remain weak. Launch dates for some projects in China and Vietnam have been pushed to the right, suggesting market conditions on the ground to be unfavourable in the short term. Land sales in Tianjin Eco City were also lacklustre, with price per GFA coming in below expectations. While Keppel's property projects remain profitable, earnings are tracking below expectations in the near term.