Hot stock: Keppel rises 8.3% after FY2021 results release

SHARES of mainboard-listed Keppel Corporation BN4 rallied on Friday (Jan 28) morning after the conglomerate posted a 6-year high FY2021 net profit of S$1 billion on Thursday.

The group had also announced that it plans to purchase up to S$500 million of its shares via market purchases, pursuant to the share purchase mandate granted by shareholders at the company's annual general meeting.

As at 9.14 am, Keppel shares rose as much as S$0.44 or 8.3 per cent to S$5.73 - its highest point since July 2020. Some 4.6 million of its shares changed hands.

The index counter later eased to trade at S$5.66 at 9.39 am, up 7 per cent or S$0.37 with about 7.8 million shares traded.

No married deals were recorded throughout the day, according to ShareInvestor data.

Keppel declared a final dividend per share of S$0.21, bringing the full-year payout to S$0.33, representing a 6 per cent yield. 

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Following Keppel’s announcement, UOB Kay Hian (UOBKH) maintained its “buy” call on the share and raised its target price to S$6.94 from S$6.74 previously, after raising FY2022-2023 estimates to factor in slightly higher segment margins.  

In a report on Friday, UOBKH analyst Adrian Loh said the group’s final dividend per share of S$0.21 was a “nice dividend surprise” which he thinks could potentially occur again in 2022. 

"The company appears to be at an interesting crossroads in 2022 with the exit of its Keppel Offshore & Marine segment and moving towards a more asset-light and recurring earnings business model, and towards its 15 per cent ROE (return on equity) target,” he commented. 

Loh noted that the outlook for Keppel’s Offshore & Marine “appears brighter” despite the segment’s lower FY2021 gross profits due to labour shortage. 

His positive sentiment is supported by: the gradual decline of Covid-19, which would ease labour issues; increased rig day rates and utilisation rates over the past 12 months; and Keppel’s higher order book from its S$3.5 billion worth of new orders in 2021.

Likewise, DBS Group Research maintains its “buy” call on the stock while raising its target price to S$6.90 from S$6.20, to incorporate a higher FY2021 book value and rolling FY2022 estimates. 

DBS analyst Ho Pei Hwa noted in a separate report on Friday that Keppel’s current valuation remains “undemanding” at 0.8 times price-to-book ratio based on its last closing price of S$5.29. 

In her view, the strong FY2021 showing for Keppel is evidence of the group’s operational improvements across segments which could sustain into FY2022. 

“Also, the widely anticipated definitive agreement relating to the yard merger, which would streamline Keppel’s operations to focus on its asset-light businesses and sustainable solutions, shall catalyse the share price,” she said.  

Like Loh, Ho is expecting a higher dividend payout in FY2022. She is projecting a 4 per cent dividend yield on a similar payout of about 45 per cent, which is the midpoint of the management’s 40 to 50 per cent guidance.