Analysts on the lookout for red flags as KepCorp unveils Q1 results

Its book-to-bill ratios have fallen below crucial levels.

Analysts are looking out for warning signs when Keppel Corp unveils its first quarter results today.

Nicholas Teo of CMC Markets noted that although numbers are not expected to fall far from estimates, the street will be particularly interested in any updates especially on their engagements with rig owners for possible new bookings for 2015.

“In this regard, book-to-bill ratios have fallen below the ‘crucial’ level of 1X since last year. What this means is that they are unable to match the pace of securing fresh contracts compared to the rate that they are completing their orders on hand,” Teo stated.

If Keppel Corp’s order book depletes further without a reasonable degree of replacement, it could mean uncertainty for the business and low earnings visibility in the years ahead.

“Further risks may reveal themselves in the form of contracts being pushed-out or delayed, as rig owners contemplate a later delivery for the rigs they have ordered. This could be because they are having difficulty in securing rentals for the rigs ordered. So far this year we have seen several delays (for later delivery) being announced, with anecdotal evidence suggesting more delays yet to come,” Teo noted.