My Thoughts on Keppel Corp

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2 years historical daily chart from Shareinvestor

Chart wise, KepCorp broke from its trend line and is currently heading towards its psychological support at $10. If it fails to hold, further downside can be expected.

My view on the current standing of KepCorp fundamentally:

Since its 2nd Quarter result, It has secured S$227 million jack up order from Qatar Petroleum and S$153 million in contracts from repeated customers.

From its 2Q result, its net debt before deducting off its short term investment increased to $3.05 billion at 30 June 2014 as compared to $1.54 billion at 31 Dec 2013. The reason for the increase was mainly due to capital expenditure and operational requirement.

Group net gearing ratio in comparison has also increased from 0.11x to 0.22x

Capex is a growth driver, so the jury is still out as to whether this increase in net debt is justifiable in the long run.

Notice a gradual decrease in cash on hand quarterly from 4th quarter Dec 2013 to 2nd Quarter Jun 2014. Mainly contributed from its operating and financing activities from the beginning of first half year 2014. Can't really deduce much from this as cash flow to me is quite subjective. 

However, I am still quite comfortable with its current cash in hand per share of $2.2723.

Dividend payout so far looks quite consistent. This company has been giving out dividend consistently throughout even during bad times. With a dividend yield of close to 4%, it is relatively attractive if you compare it within its sector(assuming its total dividend payout remains within 40-45cts for 2014)

Its CAGR(earnings per share for the last five years) is at +8.16%. If you compare its rolling P/E of 9.668x now with its sector(as shown below), it looks pretty attractive to me.

Price to book at 1.8339x is still slightly expensive within its category in comparison. But of course, intangible assets like goodwill, patents and branding, especially for KepCorp, are not physical in nature so we cant really value this company in totality using this metric.

Many expect a significant slowdown next year in global jack up rigs orders which may in turn affect Kep Corp's order book visibility. I am very bad at forward looking fundamentals, there are too many variables to take into consideration. 

In my view, if we were to judge it on its current standing, its low P/E, high cash in hand per share and consistent dividend payout makes for an attractive catch on dips. The golden question now is to ask whether Mr Market allows the price to find its support near its psychological threshold of $10 or not.

Its 3rd Quarter result will be released on 21st Oct 2014, we shall dig deeper when the time comes.

To each his/her own.