property and investments. 9.0 9.5 105 110 company description … · 2016-10-20 · property 479...

October 21, 2016

Oil &

Gas

Sin

gapore

THIS REPORT HAS BEEN PREPARED BY MAYBANK KIM ENG RESEARCH (PTE) LTD

SEE PAGE 9 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Co. Reg No: 198700034E MICA (P) : 099/03/2012

Yeak Chee Keong, CFA [email protected] (65) 6231 5842

Keppel Corp (KEP SP)

O&M’s Gap a Hard One to Fill

3Q16 missed, but bolstered by divestment gain Excluding a SGD73m one-off gain from the sale of Life Hub @ Jinqiao,

3Q16 core PATMI of SGD152m missed (-58% YoY, -26% QoQ). 9M16 core

PATMI of SGD568m (-49% YoY) formed only 58/55% of our/consensus

FY16E. O&M was the major drag. We cut FY16-18E EPS by 10-16% to

account for lower O&M revenue recognition and weaker FY16E order

intake, partly offset by the divestment gain. Maintain SELL, but SOTP-TP

lifted slightly to SGD4.57 on higher market values of some listed entities.

Weak O&M order replenishment drag on revenue Slowdown in O&M revenue to SGD516m (-63% YoY, -28% QoQ) reflects the

effect of contract deferrals and weak replenishments. YTD order win

amounted to SGD500m vs our SGD1.6b forecast for the year, on which we

cut FY16 order intake to SGD0.8b. Of the SGD4.1b in outstanding

orderbook, we estimate that the orderbook not affected by any contract

deferment is just about SGD1b. This means that revenue recognition

would continue to be lacklustre in the coming quarters. 3Q16 EBIT

margin of 11.4% (2Q16: 12.8%, 3Q15: 12.2%) beat our expectation likely

because of cost cuts. We now forecast O&M revenue of SGD2.6-3.1b over

FY16-18E, down from SGD4.2-4.5b.

Property boosted by strong China sales Keppel sold 1,370 homes in 3Q16 (2Q16: 1,200, 1Q16: 940), driven by

strong China sales. Still, this could be dampened as governments’ rollout

of property curbs start to weigh in from 2017. In Singapore, our property

analyst, Derrick Heng thinks challenges remain because land prices are

high, yet cooling measures may not be lifted soon.

Still waiting for the turn We believe a re-rating of Keppel is only possible when there is

confidence O&M have bottomed. While this seems to be the case with

the oil price, the ability of O&M clients to take delivery (and therefore

risk of further write-downs) remains questionable. Also, the earnings gap

from O&M may be hard to fill. Catalysts to our SELL call are more O&M

write-downs and a deterioration in O&M recognition. Upside risks would

come from drillers taking deliveries and continued strength in China

property sales.

Share Price SGD 5.44

12m Price Target SGD 4.57 (-16%)

Previous Price Target SGD 4.54

SELLCompany Description

Statistics

52w high/low (SGD)

3m avg turnover (USDm)

Free float (%)

Issued shares (m)

Market capitalisation

Major shareholders:

20.7%

5.0%

1.6%

1,818

16.1

Keppel corp is a conglomerate with four key business

segments: Offshore & Marine, Infrastructure,

Property and Investments.

Temasek Holdings

Aberdeen Asset Management

BlackRock Fund Advisors

7.29/4.71

78.5

SGD9.9B

USD7.1B

Price Performance

60

65

70

75

80

85

90

95

100

105

110

115

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

Keppel Corp - (LHS, SGD) Keppel Corp / Straits Times Index - (RHS, %)

-1M -3M -12M

Absolute (%) 3 (3) (25)

Relative to index (%) 4 1 (20)

Source: FactSet

FYE Dec (SGD m) FY14A FY15A FY16E FY17E FY18E

Revenue 13,283 10,296 6,747 6,779 7,365

EBITDA 2,639 1,761 1,116 1,141 1,144

Core net profit 1,875 1,525 827 883 889

Core FDEPS (cts) 102.4 83.2 45.3 48.4 48.7

Core FDEPS growth(%) 32.2 (18.7) (45.6) 6.8 0.7

Net DPS (cts) 48.0 34.0 18.0 18.0 18.0

Core FD P/E (x) 5.3 6.5 12.0 11.2 11.2

P/BV (x) 0.9 0.9 0.9 0.8 0.8

Net dividend yield (%) 8.8 6.3 3.3 3.3 3.3

ROAE (%) 18.7 14.2 7.4 7.6 7.3

ROAA (%) 6.1 5.0 2.9 3.1 3.1

EV/EBITDA (x) 8.4 10.8 15.7 15.6 15.4

Net gearing (%) (incl perps) 11.2 53.4 55.7 55.0 50.5

Consensus net profit - - 977 1,017 1,034

MKE vs. Consensus (%) - - (15.4) (13.2) (14.0)

October 21, 2016 2

Keppel Corp

Fig 1: Third quarter profit and loss summary

% chg % chg FYE Dec (SGD m) 3Q16 2Q16 3Q15 QoQ YoY Comment

Revenue 1,458.8 1,625.5 2,439.8 (10.3) (40.2) All divisions except for Property recorded lower revenue

Cost of sales (916.6) (997.0) (1,535.3) (8.1) (40.3)

Gross profit 542.3 628.5 904.4 (13.7) (40.0)

SG&A (278.7) (301.3) (390.6) (7.5) (28.7)

Other op inc/(exp)

(25.2) (36.0) (88.3) (30.0) (71.5)

Includes: - Forex gain of SGD30.7m - Asset impairment of SGD34.5m - Adjustment to gain of data centres of SGD27m

EBITDA 238.4 291.3 425.6 (18.2) (44.0)

Dep & amort. (52.7) (57.7) (55.2) (8.6) (4.4)

EBIT 185.7 233.6 370.4 (20.5) (49.9)

Non-op inc/(exp) 2.3 3.6 7.0 (35.8) (67.0)

Interest income 28.2 31.9 37.4 (11.4) (24.5)

Interest expense (52.2) (50.1) (47.0) 4.2 10.9

Associates/JV 122.4 65.4 101.5 87.1 20.6 Bolstered by SGD73m gain from sale of Life Hub @ Jinqiao

EBT 286.4 284.4 469.3 0.7 (39.0)

Taxation (60.8) (65.1) (97.0) (6.6) (37.3)

Net income 225.6 219.2 372.3 2.9 (39.4)

Minority interest (1.1) (13.5) (9.4) (92.1) (88.7)

PATMI 224.5 205.8 362.9 9.1 (38.1)

Adjusted PATMI 151.5 205.8 362.9 (26.4) (58.2) Adjusted for SGD73m gain from sale of Life Hub @ Jinqiao

Source: Company, Maybank KE

Fig 2: 9M profit and loss summary

% chg MBKE YTD as % FYE Dec (SGD m) 9M16 9M15 YoY FY16E of FY16E Comment

Revenue 4,827.3 7,816.8 (38.2) 8,465.6 57

Cost of sales (2,989.7) (5,258.2) (43.1) (5,873.2) 51

Gross profit 1,837.6 2,558.7 (28.2) 2,592.4 71

SG&A (864.1) (1,245.9) (30.6) (1,248.0) 69

Other op inc/(exp)

(109.3) 55.5 (296.9) (12.3) 891

Includes: - Forex gain of SGD17.2 . Asset Impairment of 34.5m - Adjustment to gain of data centres of SGD27m

EBITDA 864.2 1,368.3 (36.8) 1,332.1 65

Dep & amort. (167.0) (185.4) (9.9) (208.0) 80

EBIT 697.2 1,182.9 (41.1) 1,124.1 62

Non-op inc/(exp) 10.3 13.0 (20.8) 22.5 46

Interest income 88.9 88.2 0.7 119.5 74

Interest expenses (148.8) (114.3) 30.2 (209.8) 71

Associates/JV 201.5 252.9 (20.3) 202.0 100 Bolstered by SGD73m gain from sale of Life Hub @ Jinqiao

EBT 849.0 1,422.7 (40.3) 1,258.4 67

Taxation (178.4) (266.3) (33.0) (221.8) 80

Net income 670.6 1,156.4 (42.0) 1,036.5 65

Minority interest (29.7) (36.5) (18.7) (49.9) 60

PATMI 640.9 1,119.8 (42.8) 986.7 65

Adjusted PATMI 567.9 1,119.8 (49.3) 986.7 58 Adjusted for SGD73m gain from sale of Life Hub @ Jinqiao


Fig 3: Segmental breakdown

% chg % chg % chg

FYE Dec (SGD m) 3Q16 2Q16 3Q15 QoQ YoY 9M16 9M15 YoY Comment

Revenue

Offshore & marine 516 720 1,411 (28) (63) 2,054 4,918 (58) Weaker due to lower work volume and project deferments

Infrastructure 434 404 536 7 (19) 1,228 1,594 (23) Lower due to lower prices and volume of power and gas business

Property 479 469 487 2 (2) 1,451 1,245 17 Higher revenue from The Glades, Highline Residences in Singapore and Waterfront Residence in Tianjin

Investments 30 32 6 (6) 400 94 60 58

Total 1,459 1,625 2,440 (10) (40) 4,827 7,817 (38)

Net profit

Offshore & marine 11 61 166 (82) (93) 167 542 (69) Lower due to weaker revenue

Infrastructure 39 27 34 44 15 80 160 (50)

Property 157 94 144 67 9 351 333 6 Higher due to divestment gain of Life Hub @ Jinqiao

Investments 18 23 19 (22) (5) 43 86 (50)

Total 225 205 363 10 (38) 641 1,120 (43)


October 21, 2016 3

Keppel Corp

Fig 4: O&M operating margins and forecasts

3Q16 operating margins would be 11.4% if adjusted for SGD10m of asset impairments


Fig 5: Keppel O&M’s historical and forecast order wins

We cut FY16E order intake from SGD1.6b to SGD0.8b


Fig 6: Keppel O&M’s order book


9.8 10.1 10.0 9.3 10.4

11.8 12.8

13.8

16.2

19.7 19.0

26.7

20.7

24.2 26.0

21.0

15.1 13.2 12.9 12.8

14.1 14.1

16.5

14.2 14.2 14.7 15.0 13.2

12.0 13.0 12.2

13.6 12.8

9.5 11.3

10.4 10.8

0

5

10

15

20

25

30

1Q

08

2Q

08

3Q

08

4Q

08

1Q

09

2Q

09

3Q

09

4Q

09

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

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4Q

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1Q

15

2Q

15

3Q

15

4Q

15

1Q

16

2Q

16

3Q

16

FY16E

FY17E

FY18E

(%)

3.1

6.5 7.3 7.4

5.2

1.7 3.2

9.0

3.7

5.8 5.5

1.8 0.8

1.6

3.2

1.0

6.3 1.1

0.0

2.0

4.0

6.0

8.0

10.0

12.0

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16E

FY17E

FY18E

(SGD b) Transocean orders

Brazil orders

Non-Brazil orders

3.4

7.2

10.5 12.2

10.8

5.6 4.6

8.4

6.2 6.9 7.1

4.7 3.3 3.0

4.0

1.0 6.6

6.6 5.1

4.2

4.2 4.2 4.2

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16E

FY17E

FY18E

(SGD b)

Brazil orders

Non-Brazil orders

October 21, 2016 4

Keppel Corp

Fig 7: Key forecast changes

New Old % chg

FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E

Revenue 6,747 6,779 7,365 8,465.6 8,413.0 9,061.3 (20) (19) (19)

Net Profit 827 883 889 986.7 984.7 1,049.9 (16) (10) (15)

EPS 45.3 48.4 48.7 54.0 53.9 57.5 (16) (10) (15)

Source: Maybank Kim Eng

Fig 8:: Keppel’s SOTP valuation

Stake Basis Value

KepCorp’s

share Per share

(SGD m) (SGD m) (SGD)

Offshore & Marine

DynaMac Holdings 27% Mkt Value 135 36 0.02 Keppel Offshore & Marine 100% Book value adj. for impairments 702 702 0.38

Property 100% 0.75x P/BV 6,911 6,911 3.79 Infrastructure

Keppel T&T 80% Mkt Value 979 783 0.43 KIT 18% Mkt Value 1,967 358 0.20 Other Infrastructure 100% Book value 249 249 0.14

Investments k1 Ventures 36% Mkt Value 427 154 0.08 KrisEnergy 40% Mkt Value 258 104 0.06 Others 100% Book value (22) (22) (0.01)

Total value 9,275 5.08 Diluted no. of shares (m) 1,826

Value per share (SGD) 5.08

Post 10% conglomerate discount (SGD) 4.57

Implied FY17E P/E 8.9x

Implied FY17E P/BV 0.7x

Source: Maybank Kim Eng

Fig 9: Keppel 1-year rolling P/E

Source: Factset, Maybank KE

Fig 10: Keppel 1-year rolling P/BV


October 21, 2016 5

Keppel Corp

Value Proposition

Conglomerate with businesses in offshore & marine,

property, infrastructure and investments. Group allocates

capital for most efficient cost-return.

Associated more with rig building capabilities. Strong

execution and customer relationship lead to superior

market share and margins.

Privatised KepLand in Apr 15. Property segment gaining

importance over O&M as the latter’s value proposition is

under threat.

ROIC on the decline with raised debt levels from KepLand

privatisation and O&M’s increased working capital needs

and no net earnings growth.

Keppel Corp’s segment net profits

Source: Maybank KE

Price Drivers

Historical share price


1. Brent crude fell from more than USD120/bbl to under

USD90/bbl.

2. Secured five more semisub contracts worth USD4.0b from

Sete Brasil following the first unit in Dec-2011.

3. Start of current oil downturn with prices cascading more

than 60% from peak as US pumps record oil, while OPEC

refuses to cut supply.

4. Privatised Keppel Land at SGD4.38/sh, now owns almost

100% of the business unit.

5. News emerged that Sete Brasil may file for bankruptcy,

which would jeopardise its USD4.9b contract.

Financial Metrics

O&M order wins and backlog momentum are key metrics

to watch. Operating margins also an important measure of

backlog quality.

Order win momentum slowed down significantly in FY15

with zero drilling rig orders and made up mainly of

offshore and conversion orders.

Expect order drought over FY16-17 to deplete its FY15 net

orderbook of SGD9.0b. Also about 40% of orderbook

consists of Sete Brasil orders, which are at risk of

cancellations.

Offshore & Marine segment order wins


Swing Factors

Upside

Sete Brasil settles its financing woes, is able to honour all

its contracts and pays Keppel its dues.

Ability to turn contract cancellations around by re-selling

and making better profits because of forfeiture of

original client’s deposit.

Asset divestments that result in significant gains and

value unlocking, which is possible in Keppel T&T and

infrastructure segment.

Downside

Sete Brasil files for bankruptcy, dishonouring all its six

semisub contracts with Keppel O&M.

Contract cancellations by other drilling rig owners,

resulting in asset write-downs and losses.

Property segment fails to compensate for drop in O&M

profits.

[email protected]

0

500

1,000

1,500

2,000

2,500

2010 2011 2012 2013 2014 2015

(SGD m)

O&M Infrastructure Property Investments

50

60

70

80

90

100

110

120

130

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

Sep-11 Sep-12 Sep-13 Sep-14 Sep-15

Keppel Corp - (LHS, SGD)

Keppel Corp / MSCI AC Asia ex JP - (RHS, %)

3.1

6.5 7.3 7.4

5.2

1.7 3.2

9.0

3.7

5.8 5.5

1.8 0.8 1.6

3.2

1.0

6.3 1.1

0.0

2.0

4.0

6.0

8.0

10.0

12.0

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16E

FY17E

FY18E

(SGD b) Transocean orders

Brazil orders

Non-Brazil orders

1 1

2 3

5

4

mailto:[email protected]

mailto:[email protected]

October 21, 2016 6

Keppel Corp

FYE 31 Dec FY14A FY15A FY16E FY17E FY18E

Key Metrics

P/E (reported) (x) 10.0 9.4 11.9 11.2 11.1

Core P/E (x) 5.3 6.5 11.9 11.2 11.1

Core FD P/E (x) 5.3 6.5 12.0 11.2 11.2

P/BV (x) 0.9 0.9 0.9 0.8 0.8

P/NTA (x) 1.0 0.9 0.9 0.8 0.8

Net dividend yield (%) 8.8 6.3 3.3 3.3 3.3

FCF yield (%) nm nm 1.3 0.8 6.1

EV/EBITDA (x) 8.4 10.8 15.7 15.6 15.4

EV/EBIT (x) 9.3 12.5 19.3 19.1 18.8

INCOME STATEMENT (SGD m)

Revenue 13,283.0 10,296.5 6,746.6 6,778.7 7,364.9

Gross profit 3,773.2 3,026.0 2,218.7 1,660.5 1,756.9

EBITDA 2,638.6 1,760.7 1,116.4 1,141.3 1,144.4

Depreciation (265.1) (247.1) (207.8) (208.0) (208.0)

Amortisation 0.0 0.0 0.0 0.0 0.0

EBIT 2,373.4 1,513.6 908.6 933.3 936.4

Net interest income /(exp) (0.9) (35.5) (94.0) (121.0) (124.4)

Associates & JV 504.2 504.3 239.4 284.6 295.3

Exceptionals 0.0 0.0 0.0 0.0 0.0

Other pretax income 2.0 15.0 17.8 13.6 14.7

Pretax profit 2,878.7 1,997.4 1,071.7 1,110.5 1,121.9

Income tax (462.4) (404.4) (208.1) (181.7) (181.9)

Minorities (541.5) (68.3) (36.5) (45.5) (50.7)

Perpetual securities 0.0 0.0 0.0 0.0 0.0

Discontinued operations 0.0 0.0 0.0 0.0 0.0

Reported net profit 1,874.8 1,524.6 827.1 883.2 889.4

Core net profit 1,874.8 1,524.6 827.1 883.2 889.4

Preferred Dividends 0.0 0.0 0.0 0.0 0.0

BALANCE SHEET (SGD m)

Cash & Short Term Investments 5,736.0 1,892.8 2,275.4 1,874.2 1,935.0

Accounts receivable 3,140.1 3,808.2 3,371.0 3,294.2 3,175.5

Inventory 10,681.1 10,650.5 9,823.9 9,685.8 9,616.4

Reinsurance assets 0.0 0.0 0.0 0.0 0.0

Property, Plant & Equip (net) 2,673.0 2,845.5 2,948.1 3,160.5 3,372.8

Intangible assets 101.7 99.8 146.6 146.6 146.6

Investment in Associates & JVs 4,988.4 5,521.8 5,760.8 6,045.7 6,341.0

Other assets 4,234.4 4,113.3 4,496.6 4,496.6 4,496.6

Total assets 31,554.8 28,932.1 28,822.4 28,703.6 29,083.9

ST interest bearing debt 1,795.6 856.7 1,702.2 1,780.2 1,858.4

Accounts payable 5,718.6 5,918.1 5,393.1 4,878.9 4,769.8

Insurance contract liabilities 0.0 0.0 0.0 0.0 0.0

LT interest bearing debt 5,586.9 7,401.9 7,376.3 7,120.7 6,814.2

Other liabilities 3,726.0 2,829.0 2,136.0 2,144.0 2,289.0

Total Liabilities 16,827.2 17,006.2 16,607.5 15,923.5 15,731.6

Shareholders Equity 10,380.8 11,095.7 11,348.2 11,867.8 12,389.4

Minority Interest 4,346.9 830.2 866.7 912.2 962.9

Total shareholder equity 14,727.6 11,925.9 12,214.9 12,780.0 13,352.4


Total liabilities and equity 31,554.8 28,932.1 28,822.4 28,703.6 29,083.9

CASH FLOW (SGD m)

Pretax profit 2,878.7 1,997.4 1,071.7 1,110.5 1,121.9

Depreciation & amortisation 265.1 247.1 207.8 208.0 208.0

Adj net interest (income)/exp 0.9 35.5 94.0 121.0 124.4

Change in working capital (1,762.2) (1,724.8) (411.3) (343.1) 184.3

Cash taxes paid (462.4) (404.4) (208.1) (181.7) (181.9)

Other operating cash flow (569.9) (519.8) (14.5) (116.5) (128.1)

Cash flow from operations 21.8 (705.0) 437.5 495.5 1,022.4

Capex (594.9) (1,147.0) (310.4) (420.4) (420.4)

Free cash flow (573.1) (1,852.0) 127.1 75.1 602.0

Dividends paid (1,028.5) (955.7) (574.6) (363.6) (367.8)

Equity raised / (purchased) 34.3 0.8 0.0 0.0 0.0


Change in Debt 271.5 923.6 819.9 (177.7) (228.2)

Perpetual securities distribution 0.0 0.0 0.0 0.0 0.0

Other invest/financing cash flow 1,376.8 (2,039.3) 10.1 65.1 54.7

Effect of exch rate changes 42.2 28.1 0.0 0.0 0.0

Net cash flow 171.8 (3,853.2) 382.5 (401.1) 60.7

October 21, 2016 7

Keppel Corp

FYE 31 Dec FY14A FY15A FY16E FY17E FY18E

Key Ratios

Growth ratios (%)

Revenue growth 7.3 (22.5) (34.5) 0.5 8.6

EBITDA growth 11.0 (33.3) (36.6) 2.2 0.3

EBIT growth 11.2 (36.2) (40.0) 2.7 0.3

Pretax growth 3.0 (30.6) (46.3) 3.6 1.0

Reported net profit growth 1.6 (18.7) (45.7) 6.8 0.7

Core net profit growth 32.8 (18.7) (45.7) 6.8 0.7

Profitability ratios (%)

EBITDA margin 19.9 17.1 16.5 16.8 15.5

EBIT margin 17.9 14.7 13.5 13.8 12.7

Pretax profit margin 21.7 19.4 15.9 16.4 15.2

Payout ratio 46.5 40.4 39.5 37.0 36.8

DuPont analysis

Net profit margin (%) 14.1 14.8 12.3 13.0 12.1

Revenue/Assets (x) 0.4 0.4 0.2 0.2 0.3

Assets/Equity (x) 3.0 2.6 2.5 2.4 2.3

ROAE (%) 18.7 14.2 7.4 7.6 7.3

ROAA (%) 6.1 5.0 2.9 3.1 3.1

Liquidity & Efficiency

Cash conversion cycle 243.0 361.5 555.8 501.9 468.0

Days receivable outstanding 82.6 121.5 191.5 177.0 158.1

Days inventory outstanding 372.4 528.1 813.9 686.1 619.5

Days payables outstanding 212.0 288.1 449.7 361.3 309.7

Dividend cover (x) 2.2 2.5 2.5 2.7 2.7

Current ratio (x) 2.0 1.8 1.8 1.8 1.8

Leverage & Expense Analysis

Asset/Liability (x) 1.9 1.7 1.7 1.8 1.8

Net gearing (%) (incl perps) 11.2 53.4 55.7 55.0 50.5

Net gearing (%) (excl. perps) 11.2 53.4 55.7 55.0 50.5

Net interest cover (x) nm 42.6 9.7 7.7 7.5

Debt/EBITDA (x) 2.8 4.7 8.1 7.8 7.6

Capex/revenue (%) 4.5 11.1 4.6 6.2 5.7

Net debt/ (net cash) 1,646.5 6,365.8 6,803.2 7,026.6 6,737.7

Source: Company; Maybank

October 21, 2016 8

Keppel Corp

Research Offices

REGIONAL

Sadiq CURRIMBHOY

Regional Head, Research & Economics

(65) 6231 5836 [email protected]

WONG Chew Hann, CA

Regional Head of Institutional Research


ONG Seng Yeow

Regional Head of Retail Research


TAN Sin Mui

Director of Research


ECONOMICS

Suhaimi ILIAS Chief Economist Singapore | Malaysia (603) 2297 8682 [email protected]

Luz LORENZO Philippines (63) 2 849 8836 [email protected]

Tim LEELAHAPHAN Thailand (66) 2658 6300 ext 1420 [email protected]

JUNIMAN Chief Economist, BII Indonesia (62) 21 29228888 ext 29682

[email protected]

STRATEGY

Sadiq CURRIMBHOY

Global Strategist


Willie CHAN

Hong Kong / Regional


MALAYSIA

WONG Chew Hann, CA Head of Research (603) 2297 8686 [email protected] • Strategy

Desmond CH’NG, ACA (603) 2297 8680 [email protected] • Banking & Finance

LIAW Thong Jung (603) 2297 8688 [email protected] • Oil & Gas Services- Regional

ONG Chee Ting, CA (603) 2297 8678 [email protected] • Plantations - Regional

Mohshin AZIZ (603) 2297 8692 [email protected] • Aviation - Regional • Petrochem

YIN Shao Yang, CPA (603) 2297 8916 [email protected] • Gaming – Regional • Media

TAN Chi Wei, CFA (603) 2297 8690 [email protected] • Power • Telcos

WONG Wei Sum, CFA (603) 2297 8679 [email protected] • Property

LEE Yen Ling (603) 2297 8691 [email protected] • Building Materials • Glove • Ports • Shipping

Ivan YAP (603) 2297 8612 [email protected] • Automotive • Semiconductor • Technology

Kevin WONG (603) 2082 6824 [email protected] • REITs • Consumer Discretionary

LIEW Wei Han

(603) 2297 8676 [email protected] • Consumer Staples

Tee Sze Chiah Head of Retail Research (603) 2297 6858 [email protected]

HONG KONG / CHINA

Howard WONG Head of Research (852) 2268 0648 [email protected] • Strategy • Oil & Gas - Regional

Benjamin HO (852) 2268 0632 [email protected] • Consumer & Auto

Jacqueline KO, CFA (852) 2268 0633 [email protected] • Consumer Staples & Durables

Ka Leong LO, CFA (852) 2268 0630 [email protected] • Consumer Discretionary & Auto

Mitchell KIM (852) 2268 0634 [email protected] • Internet & Telcos

Ning MA (852) 2268 0672 [email protected] • Insurance

Sonija LI, CFA, FRM (852) 2268 0641 [email protected] • Gaming

Stefan CHANG, CFA (852) 2268 0675 [email protected] • Technology – Regional

INDIA

Jigar SHAH Head of Research

(91) 22 6623 2632 [email protected]

• Strategy • Oil & Gas • Automobile • Cement

Vishal MODI


• Banking & Financials

Abhijeet KUNDU


• Consumer

Neerav DALAL


• Software Technology • Telcos

SINGAPORE

Neel SINHA Head of Research (65) 6231 5838 [email protected] • Strategy • SMID Caps – Regional

Gregory YAP (65) 6231 5848 [email protected] • SMID Caps • Technology & Manufacturing • Telcos

YEAK Chee Keong, CFA (65) 6231 5842 [email protected] • Offshore & Marine

Derrick HENG, CFA (65) 6231 5843 [email protected] • Transport • Property • REITs (Office)

John CHEONG, CFA (65) 6231 5845 [email protected] • Small & Mid Caps • Healthcare

Ng Li Hiang (65) 6231 5840 [email protected] • Banks

INDONESIA

Isnaputra ISKANDAR Head of Research (62) 21 8066 8680 [email protected] • Strategy • Metals & Mining • Cement

Rahmi MARINA (62) 21 8066 8689 [email protected] • Banking & Finance

Aurellia SETIABUDI (62) 21 8066 8691 [email protected] • Property

Pandu ANUGRAH (62) 21 8066 8688 [email protected] • Infra • Construction • Transport• Telcos

Janni ASMAN (62) 21 8066 8687 [email protected] • Cigarette • Healthcare • Retail

Adhi TASMIN (62) 21 8066 8694 [email protected] • Plantations

Anthony LUKMAWIJAYA (62) 21 8066 8690 [email protected] • Aviation

PHILIPPINES

Michael BENGSON Head of Research (63) 2 849 8840 [email protected] • Strategy • Utilities • Conglomerates • Telcos Lovell SARREAL (63) 2 849 8841 [email protected] • Consumer • Media • Cement

Rommel RODRIGO (63) 2 849 8839 [email protected] • Conglomerates • Property • Gaming • Ports/ Logistics

Katherine TAN (63) 2 849 8843 [email protected] • Banks • Construction

THAILAND

Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] • Strategy • Consumer • Materials • Ind. Estates

Sittichai DUANGRATTANACHAYA (66) 2658 6300 ext 1393 [email protected] • Services Sector • Transport

Yupapan POLPORNPRASERT (66) 2658 6300 ext 1394 [email protected] • Oil & Gas

Tanawat RUENBANTERNG (66) 2658 6300 ext 1395 [email protected] • Banks & Diversified Financials

Vorapoj HONGPINYO (66) 2658 6300 ext 1392 [email protected] • Real Estate & Contractors

Sukit UDOMSIRIKUL Head of Retail Research (66) 2658 6300 ext 5090 [email protected]

Mayuree CHOWVIKRAN (66) 2658 6300 ext 1440 [email protected] • Strategy

Padon VANNARAT (66) 2658 6300 ext 1450 [email protected] • Strategy

Surachai PRAMUALCHAROENKIT (66) 2658 6300 ext 1470 [email protected] • Auto • Conmat • Contractor • Steel

Suttatip PEERASUB (66) 2658 6300 ext 1430 [email protected] • Media • Commerce

Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 [email protected] • Energy • Petrochem

Termporn TANTIVIVAT (66) 2658 6300 ext 1520 [email protected] • Property

Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 [email protected] • Transportation • Small cap

VIETNAM

LE Hong Lien, ACCA Head of Institutional Research (84) 8 44 555 888 x 8181 [email protected] • Strategy • Consumer • Diversified • Utilities

THAI Quang Trung, CFA, Deputy Manager, Institutional Research (84) 8 44 555 888 x 8180 [email protected] • Real Estate • Construction • Materials

Le Nguyen Nhat Chuyen (84) 8 44 555 888 x 8082 [email protected] • Oil & Gas

NGUYEN Thi Ngan Tuyen, Head of Retail Research (84) 8 44 555 888 x 8081 [email protected] • Food & Beverage • Oil&Gas • Banking

TRINH Thi Ngoc Diep (84) 4 44 555 888 x 8208 [email protected] • Technology • Utilities • Construction

PHAM Nhat Bich (84) 8 44 555 888 x 8083 [email protected] • Consumer • Manufacturing • Fishery

NGUYEN Thi Sony Tra Mi (84) 8 44 555 888 x 8084 [email protected] • Port operation • Pharmaceutical • Food & Beverage

TRUONG Quang Binh (84) 4 44 555 888 x 8087 [email protected] • Rubber plantation • Tyres and Tubes • Oil&Gas

October 21, 2016 9

Keppel Corp

APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES

DISCLAIMERS This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.

The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.

This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.

MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report to the extent permitted by law.

This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect.

This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report.

Malaysia Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.

Singapore This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.

Thailand Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of Maybank Kim Eng Securities (Thailand) Public Company Limited. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) accepts no liability whatsoever for the actions of third parties in this respect.

Due to different characteristics, objectives and strategies of institutional and retail investors, the research reports of MBKET Institutional and Retail Research Department may differ in either recommendation or target price, or both. MBKET Retail Research is intended for retail investors (http://kelive.maybank-ke.co.th) while Maybank Kim Eng Institutional Research is intended only for institutional investors based outside Thailand only.

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. MBKET does not confirm nor certify the accuracy of such survey result.

The disclosure of the Anti-Corruption Progress Indicators of a listed company on the Stock Exchange of Thailand, which is assessed by Thaipat Institute, is made in order to comply with the policy and sustainable development plan for the listed companies of the Office of the Securities and Exchange Commission. Thaipat Institute made this assessment based on the information received from the listed company, as stipulated in the form for the assessment of Anti-corruption which refers to the Annual Registration Statement (Form 56-1), Annual Report (Form 56-2), or other relevant documents or reports of such listed company. The assessment result is therefore made from the perspective of Thaipat Institute that is a third party. It is not an assessment of operation and is not based on any inside information. Since this assessment is only the assessment result as of the date appearing in the assessment result, it may be changed after that date or when there is any change to the relevant information. Nevertheless, MBKET does not confirm, verify, or certify the accuracy and completeness of the assessment result.

US This third-party research report is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations. All U.S. persons receiving and/or accessing this report and wishing to effect transactions in any security mentioned within must do so with: Maybank Kim Eng Securities USA Inc. 777 Third Avenue 21st Floor New York, New York 1- (212) 688-8886 and not with, the issuer of this report.

http://kelive.maybank-ke.co.th/

http://kelive.maybank-ke.co.th/

October 21, 2016 10

Keppel Corp

Disclosure of Interest

Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.

Singapore: As of 21 October 2016, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.

Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.

Hong Kong: As of 21 October 2016, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.

India: As of 21 October 2016, and at the end of the month immediately preceding the date of publication of the research report, KESI, authoring analyst or their associate / relative does not hold any financial interest or any actual or beneficial ownership in any shares or having any conflict of interest in the subject companies except as otherwise disclosed in the research report. In the past twelve months KESI and authoring analyst or their associate did not receive any compensation or other benefits from the subject companies or third party in connection with the research report on any account what so ever except as otherwise disclosed in the research report.

MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.

OTHERS

Analyst Certification of Independence

The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

Reminder

Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.

No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

Ong Seng Yeow | Executive Director, Maybank Kim Eng Research

UK This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Conduct Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.

DISCLOSURES Legal Entities Disclosures Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938- H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This report is distributed in Singapore by Maybank KERPL (Co. Reg No 198700034E) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Maybank Kim Eng Securities (“PTMKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the Financial Services Authority (Indonesia). Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities Limited (License Number: 117/GP-UBCK) is licensed under the State Securities Commission of Vietnam. Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited and the Bombay Stock Exchange and is regulated by Securities and Exchange Board of India (“SEBI”) (Reg. No. INZ000010538). KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) and as Research Analyst (Reg No: INH000000057) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.

October 21, 2016 11

Keppel Corp

Historical recommendations and target price: Keppel Corp (KEP SP)

Definition of Ratings

Maybank Kim Eng Research uses the following rating system

BUY Return is expected to be above 10% in the next 12 months (excluding dividends)

HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends)

SELL Return is expected to be below -10% in the next 12 months (excluding dividends)

Applicability of Ratings

The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16

Keppel Corp

21 Apr Hold : SGD8.5

24 Jul Hold : SGD7.8

23 Oct Hold : SGD7.7

19 Jan Sell : SGD4.2

30 Mar Sell : SGD4.4

22 Jul Sell : SGD4.5

21 Sep Sell : SGD4.5

October 21, 2016 12

Keppel Corp

Malaysia Maybank Investment Bank Berhad

(A Participating Organisation of

Bursa Malaysia Securities Berhad)

33rd Floor, Menara Maybank,

100 Jalan Tun Perak,

50050 Kuala Lumpur

Tel: (603) 2059 1888;

Fax: (603) 2078 4194

Singapore Maybank Kim Eng Securities Pte Ltd

Maybank Kim Eng Research Pte Ltd

50 North Canal Road

Singapore 059304

Tel: (65) 6336 9090

London Maybank Kim Eng Securities

(London) Ltd

PNB House

77 Queen Victoria Street

London EC4V 4AY, UK

Tel: (44) 20 7332 0221

Fax: (44) 20 7332 0302

New York Maybank Kim Eng Securities USA

Inc

777 Third Avenue, 21st Floor

New York, NY 10017, U.S.A.

Tel: (212) 688 8886

Fax: (212) 688 3500

Stockbroking Business:

Level 8, Tower C, Dataran Maybank,

No.1, Jalan Maarof

59000 Kuala Lumpur

Tel: (603) 2297 8888

Fax: (603) 2282 5136

Hong Kong Kim Eng Securities (HK) Ltd

Level 30,

Three Pacific Place,

1 Queen’s Road East,

Hong Kong

Tel: (852) 2268 0800

Fax: (852) 2877 0104

Indonesia PT Maybank Kim Eng Securities

Sentral Senayan III, 22nd Floor

Jl. Asia Afrika No. 8

Gelora Bung Karno, Senayan

Jakarta 10270, Indonesia

Tel: (62) 21 2557 1188

Fax: (62) 21 2557 1189

India Kim Eng Securities India Pvt Ltd

2nd Floor, The International,

16, Maharishi Karve Road,

Churchgate Station,

Mumbai City - 400 020, India

Tel: (91) 22 6623 2600

Fax: (91) 22 6623 2604

Philippines Maybank ATR Kim Eng Securities Inc.

17/F, Tower One & Exchange Plaza

Ayala Triangle, Ayala Avenue

Makati City, Philippines 1200

Tel: (63) 2 849 8888

Fax: (63) 2 848 5738

Thailand Maybank Kim Eng Securities

(Thailand) Public Company Limited

999/9 The Offices at Central World,

20th - 21st Floor,

Rama 1 Road Pathumwan,

Bangkok 10330, Thailand

Tel: (66) 2 658 6817 (sales)

Tel: (66) 2 658 6801 (research)

Vietnam Maybank Kim Eng Securities Limited

4A-15+16 Floor Vincom Center Dong

Khoi, 72 Le Thanh Ton St. District 1

Ho Chi Minh City, Vietnam

Tel : (84) 844 555 888

Fax : (84) 8 38 271 030

Saudi Arabia In association with

Anfaal Capital

Villa 47, Tujjar Jeddah

Prince Mohammed bin Abdulaziz

Street P.O. Box 126575

Jeddah 21352

Tel: (966) 2 6068686

Fax: (966) 26068787

South Asia Sales Trading Kevin Foy

Regional Head Sales Trading

[email protected]

Tel: (65) 6636-3620

US Toll Free: 1-866-406-7447

North Asia Sales Trading Andrew Lee

[email protected]

Tel: (852) 2268 0283

US Toll Free: 1 877 837 7635

Malaysia Joann Lim [email protected] Tel: (603) 2717 5166

Thailand Tanasak Krishnasreni [email protected] Tel: (66)2 658 6820

Indonesia Harianto Liong [email protected] Tel: (62) 21 2557 1177

London Scott Kinnear-Nock [email protected] Tel: (44) 207-332-0221

New York Andrew Dacey [email protected] Tel: (212) 688 2956

India Manish Modi [email protected] Tel: (91)-22-6623-2601

Vietnam Patrick Mitchell

[email protected]

Tel: (84)-8-44-555-888 x8080

Philippines Keith Roy [email protected] Tel: (63) 2 848-5288

www.maybank-ke.com | www.maybank-keresearch.com

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