Hot stock: Keppel Corp declines 5.1% after earnings fall
Janice Tan
SHARES of Keppel Corporation declined on Friday (Feb 3), the day after the group reported lower H2 earnings.
The index counter shed as much as 5.5 per cent or S$0.42 to S$7.23 in late morning trading, before ending the day S$0.39 or 5.1 per cent lower at S$7.26 on turnover of 12.4 million shares.
Keppel’s share price movements came after the group on Thursday reported a 40.6 per cent year-on-year decline in net profit to S$429.1 million for the second half ended December, from S$722.9 million.
The overall bottom-line decline was largely due to lower revenue from continuing operations. This translated to an earnings per share of S$0.242 for H2 FY2022, down from S$0.397 in H2 FY2021.
Analysts remained generally positive about Keppel’s prospects. UOB Kay Hian (UOBKH) on Friday said Keppel had “a solid year overall” in FY2022 with better performance in its infrastructure, asset management, data centre and M1 businesses.
CGS-CIMB was also positively surprised by the strength in Keppel’s infrastructure earnings. The group’s FY2022 net profit of S$926.6 million was in line with the research team’s expectations. It maintained “add” on the stock and raised its target price to S$10.04 from S$9.37, implying a potential upside of 38.5 per cent.
UOBKH analyst Adrian Loh maintained “buy” on Keppel but lowered his target price slightly to S$9.68 from S$10.11, implying a potential upside of 33.5 per cent. The lower target price was due to lower book values reported for Keppel’s urban development and connectivity segments as at end-2022.
The research team also made “mild changes” to its 2023 and 2024 earnings forecasts for Keppel, lowering its FY2023 forecast by 0.7 per cent to S$972 million and increasing its FY2024 forecast by 3.7 per cent to S$1.1 billion
All of Keppel’s business segments were profitable despite weaker-than-expected profit after tax and minority interests and poorer showing from China properties, the research team said. According to Loh, this was something not seen in Keppel’s results in the past few years.
Looking ahead, UOBKH expects Keppel’s energy and environment business to stay on a growth path despite the Keppel Offshore & Marine divestment. The group’s urban development segment is also projected to turn around in 2023, as China’s economy improves.
CGS-CIMB believes there is room for Keppel to write back more of the value of its rigs if market conditions continue to improve. In H2 2022, Keppel wrote back S$292.8 million for its rigs.
