What should investors expect from KepCorp’s Q2 results?

Headline numbers don’t matter.

Keppel Corp is due to report its second-quarter results after trading hours today. According to Nicholas Teo of CMC Markets, the spotlight will not be on KepCorp’s headline numbers but will instead be focused on the group’s future business visibility.

“For Keppel, analysts are not likely to over- scrutinise the numbers that may be reported. Instead the market will be most keen on clues from management with regards to visibility for their businesses –especially their core rig business- going forward. Even the suggestions of ‘warm engagements’ with rig owners- with the potential of new orders-may spark a large degree of excitement and interest in the stock,” he said.

However, Teo warned that Keppel is unlikely to report new orders in the near future.

“Data in a Bloomberg intelligence release reported that the number of idle drill ships have more than tripled since last year. This is roughly about a quarter of the world’s total fleet being rested. This landscape hardly suggests that the likelihood of new drill ships orders may be in the horizon,” he noted.

“From the same report, the scenario for idling deep water platforms (also another Keppel’s staple), is similarly just as stark. Almost 25% of the world’s 190 semi submersibles or deep water platforms have been idled due to lack of demand with crude trading at half its value from 2014,” Teo said.

He also stated that the expected deliveries of more than 60 new rigs book th rough the end of 2018 will further pressure rig owners’ already strained bottom line, most of whom are Keppel’s likely customers.

“Finally, the chart on the stock looks like it could test the $8 level again. If it breaks this support cleanly, we may see a further rush for the door to exit this name. Conversely though, should Keppel manage to ‘pull a rabbit out of the hat’ by surprising the market with key improvements gathered from their integration of Keppel Land, or even excite the market with a new business direction, we may see a rebound of the stock to test its first resistance of $8.4,” Teo added.