Analysts are mixed on Keppel Corp following the announcement of the exit of its rig building business.
On one hand, Phillip Securities has kept its “buy” rating for the stock with an unchanged target price of $6.12.
On the other hand, CGS-CIMB Securities has maintained its “add” recommendation for the stock, albeit with a lower target price of $6.40 from $6.46 previously.
Meanwhile, DBS Group Research has downgraded its call on the stock to “hold” from “buy”, though it has raised its target price to $5.85 from $5.50 previously.
On Jan 28, Keppel announced that its offshore & marine (O&M) business will be restructured into three units – operating company (Op co), rig company (Rig co) and development company (Dev co).
Op co will focus on higher value-adding design, engineering and procurement, with fabrication subcontracted to third parties.
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Rig co will focus on putting completed rigs to work or selling them. Rig co itself could be divested of.
Dev co will focus on completing rigs under construction, prioritising projects with firm contracts.
According to Phillip Securities, the path of the divestment of Keppel’s offshore rig building business has become “clearer”.
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“We see the successful divestment of Rig co as a potential catalyst for the company,” Phillip Securities’ senior research analyst Terence Chua writes in a Feb 1 note.
CGS-CIMB says it takes “comfort” from Keppel’s announcement to exit the offshore rig building business.
“Near-term catalysts include successful sale or chartering of rigs or winning of renewable orders,” says CGS-CIMB’s head of research Lim Siew Khee in a Jan 28 report.
However, DBS believes “more clarity” on Keppel’s restructuring is required to restore “confidence”.
“…we keep an eye on restructuring execution and await more positive indicators to revisit the stock,” DBS analyst Ho Pei Hwa says in a Jan 29 note.
As at 11.48 am, Keppel was down 11 cents or 2.2% at $4.90 with 7.7 million shares changed hands.
