Keppel to shock peers with 30% profit growth

It's bound to beat 2011 record.

According to Barclays, it expects Keppel Corp to deliver c30% y/y earnings growth when it reports its 2012 earnings on 24 January. Keppel is likely to deliver another year of record earnings, beating the previous record in 2011. 

The earnings growth should be driven by the strong contribution from its property segment and supported byanother robust year for it s offshore & marine business.

The current rig construction cycle continues with state owned companies taking up the slack after the strong order momentum we saw from the independent drillers in 2010-11.

Here's more from Barclays:

We expect the momentum to continue in 2013 driven by demand for deepwater new builds and the replacement cycle for jack ups. We reiterate our EW rating and S$13.50 price target.

Sustained offshore & marine margins in 4Q12: We expect 4Q12 to be another robust quarter, with 1-2 jackups to be delivered and the completion of two semisubmersible upgrades and other conversion/completion projects.

We estimate an operating margin of 13% for 4Q12, in-line with the margin in 3Q12, as the company starts to recognize revenue on some of its higher priced contracts.

Earnings surprise from other segments? Earnings from Keppel’s property and infrastructure segments could surprise on the upside with property sales for Keppel Land (not rated) likely to have picked up in Singapore and overseas markets in 4Q12.

A potential improvement in engineering, procurement and construction revenue recognition from its Doha North project, with Stage 1 estimated to be completed in 2012, could also deliver a better-than-expected set of results.

Attractive valuations: Keppel is currently trading at 12x 2013E P/E, which is attractive compared to its historical average of 13x and current average of its peers (13x). We continue to like the company for its sector-leading margins and returns.

Further orders in 2013: We expect 2013 to be another good year for Keppel, on the back of cS$10bn in orders in 2012. We expect further orders to drive its shares further.