Keppel falls for a second consecutive day, a two-day fall of 0.3% 14 February 2020

NEWS BITES ASIA - SINGAPORE

Keppel Corporation Limited (SI:BN4), Singapore's 3rd largest Industrial Conglomerates company by market cap, has fallen 1.0c (0.1%) for a second consecutive day on Friday. This brought its two-day fall to 2.0c (0.3%), compared with the Straits Times Index which fell 3.3 points (0.1%) in the two days for a relative price change of -0.2%. Cumulative volume in the 2 days was 0.6 times the average 2-day volume of 3.5 million shares. Keppel's stock last traded at SGD6.72. There were 1,960,000 shares worth SGD13.2 million (US$9.5 million) traded today.

BULLISH TURNING POINT

Price/Earnings

The P/E of 12.9 is 0.2 times the highest average P/E of 61.6 in the last five years. This is a value criterion, according to Benjamin Graham who described as a value criterion "A P/E ratio down to less than four-tenth of the highest average P/E ratio the stock attained in the most recent five years".

Stock Summary

CurrencySingapore Dollar (SGD) 1 SGD = 0.72 USD
Today's close (SGD)6.72
52-Week Range (SGD)5.7-7.0
SectorIndustrial Conglomerates sector
Shares Outstanding1,820,000,000
Market CapSGD12.2 billion (US$8.8 billion)

Highlights in today's Report:

SECTION 1 TODAY'S BEARISH SIGNALS

SECTION 2 TODAY'S BULLISH SIGNALS

RECAP FROM PREVIOUS REPORTS (UPDATED AT THE LAST PRICE OF SGD6.72):

SECTION 3 THE PAST WEEK

SECTION 4 ONGOING BULLISH PARAMETERS

SECTION 5 ONGOING BEARISH PARAMETERS

SECTION 6 SUMMARY FINANCIALS

SECTION 7 CORPORATE PROFILE

SECTION 1 KEPPEL BEARISH SIGNALS

1.1 Overvaluation [compared with sector average]:

Dividend Yield

+ To quote Benjamin Graham: "A dividend yield of at least two-thirds the triple-A bond yield"; the stock's dividend yield is 2 times the triple-A bond yield of 1.7%.

+ The relative yield of Keppel, defined by its yield of 3.4%, divided by average yield of dividend yielding stocks in the Straits Times Index of 5.2% is 65.8%. This suggests Keppel stock is overvalued in dividend yield terms.

Price to Sales

+ Price/Sales of 2 [1.0].

Price to Book

+ Price to Book of 1.1 [0.8].

1.2 Downtrend:

Price/Moving Average Price and MACD:

+ The Moving Average Convergence Divergence (MACD) indicator of 12-day Exponential Moving Average (EMA) of 6.72 minus the 26-day EMA of 6.74 is negative suggesting a bearish signal. Both the 12-day EMA as well as the 26-day EMA are falling, another bearish signal.

Past Month:

+ The price dropped 2.0% in the past month.

+ Compared with the Straits Times Index which fell 1.5% for the month, this represented a relative price decrease for Keppel's stock of 0.5% for the month.

+ Falls to Rises: in the past month the number of falls outnumbered rises 14:9 or 1.6:1.

SECTION 2 KEPPEL BULLISH SIGNALS

2.1 Undervaluation [compared with sector average]:

Price/Earnings and Earnings Yield

+ Price/Earnings of 12.9 [17.7]. The P/E of 12.9 plus annual inflation in the Singapore of 0.8% adds up to 13.7, well within the value benchmark Rule of 19.

+ Earnings yield of 7.7% is 4.6 times the 10-year bond yield of 1.69%.

Price to Book

+ The P/E of 12.9 multiplied by the P/NTA of 1.1 is 13.8. Being less than the Benjamin Graham benchmark of 22.5 the stock appears undervalued.

MCap/Total Assets

+ Tobin's Q Ratio, defined as MCap divided by Total Assets, is 0.5. Compared with the rest of the market the stock is undervalued.

2.2 Uptrend:

Price/Moving Average Price:

+ The Price/MAP of 1.06 for BN4 is higher than the Price/MAP for the Straits Times Index of 0.98.

+ The price to 200-day MAP ratio is 1.06, a bullish indicator. In the past 200 days this ratio has exceeded 1.06 83 times suggesting further upside. The 50-day MAP of SGD6.75 is higher than the 200-day MAP of SGD6.35, another bullish indicator.

Past Week:

+ In the past week, volume was 0.5 times average and the shares were up 0.1%.

Rising Relative Strength (1mo, 3 mo):

+ In the Singapore market of 362 stocks and 5 units traded today, the stock has a 6-month relative strength of 73 indicating it has outperformed 73% of the market.

+ Also, the relative strength percentile is Rising at 42 for 3 months and 57 for 1 month.

2.3 High Price Performance Indicators and rank of Keppel in the Singapore market:

DescriptionValueRank In Market
Today's Trading TurnoverSGD13.2 million (US$9.5 million)In Top 3%
MCapSGD12.2 billionIn Top 5%
Volatility %0.8In Top Quartile

RECAP FROM PREVIOUS REPORTS (UPDATED AT THE LAST PRICE OF SGD6.72):

SECTION 3 THE PAST WEEK

3.1 Snapshot: Keppel stock was up 1.0c or 0.1% in the past week. Volume in the week was 0.5 times average trading of 17.4 million shares. It underperformed the Straits Times Index in 3 out of 5 days. The price ranged between a low of 6.7 on Tuesday, Feb 11 and a high of 6.74 on Wednesday, Feb 12.

DayKeppelClose price [SGD]Price change %Relative change %Comment
ThursdayDecreases6.73-0.1-0.05
WednesdayRises on high volatility6.740.6-0.8Week-high of 6.74 Top Rise
TuesdayDecreases6.7-0.3-0.7Week-low of 6.7
MondayIncreases after finding support6.720.10.7Price rise on rising relative strength
FridayDecreases on average volume6.71-0.61.0Steepest Fall

+ Keppel Corporation Limited is placed 188/309 in BuySellSignals' ranking of Singapore performers in the past week, a percentile ranking of 40.

3.2 Volatility:

+ Keppel is at a discount of 3.6% to its 12-month high of SGD6.97 on October 29, 2019. It is also at a premium of 18.5% to the 12-month low of SGD5.67 on August 29.

SECTION 4 ONGOING BULLISH PARAMETERS

4.1 Performance:

+ Return on Equity 8.3% [3.6%].

+ Return on Assets 3.6% [2.1%].

+ Net profit margin has averaged 10.5% in the last 3 years. This is better than the sector average of 7.6% and suggests a high margin of safety.

+ As per the Du Pont analysis, Return on Equity [ROE] of 8.3% is better than sector average of 3.6%. ROE is computed as net profit margin of 16.0% times asset turnover [sales/assets] of 0.22 times leverage factor [total assets/shareholders' equity] of 2.3.

4.2 Growth:

Quarterly Trend in Revenue, Net Profit and Net Profit Margin:

+ Net Profit growth has shown signs of recovery in recent quarters. [All figures in %]

Qtr-endedRevenue GrowthNet Profit GrowthNet Profit Margin
Sep 19 [Q3]15.83.88
Jun 19 [Q2]16.6-24.48.6

4.3 Past 4 Quarters Sequential EPS growth averaged -0.8%:

Quarterly ReportEPS (c)Growth %
Q3/20198.84.8
Q2/20198.4-23.6
Q1/201911.057.1
Q4/20187.0-41.7

The most recent quarter (Q3/2019) showed a rise of 4.8% in sequential growth of Quarterly EPS. There have been two rises and two declines in the past 4 quarters. Average quarterly growth in the past 4 quarters was -0.8%.

4.4 Past 5 years Annual EPS growth:

Annual ReportEPSGrowth %
201852.0c381.5
201710.80c-75.0
201643.20c-48.6
201584.0c-18.4
2014SGD1.032.0

Average Annual Compounded rate of growth in EPS for the 5 years was -12.4%. There have been two rises and three declines in the past 5 years.

4.5 Moving Annual Return (Past 5 years)

Based on a dynamic start date of 5 years ago, the real rate of return has averaged 8.9%. The Moving Annual Return has been positive in 3 of the last 5 years. An investment a year ago in BN4 would have produced a return of 17.7%.

BN4Close (SGD)Dividends (SGD)Capital Gain / (Loss) %% YieldAnnual Return %
Feb 146.720.2313.83.917.7
1 Yr ago5.90.29(18.9)4(14.9)
2 Yrs ago7.280.224.83.428.2
3 Yrs ago5.840.340.87.248.1
4 Yrs ago4.140.48(41.5)6.8(34.7)

Close 5 years ago SGD7.08

4.6 Increased VWAP

Past five years, 12 months ended Feb 14 (SGD)

YearHigh PriceVWAPLow Price
20206.976.395.67
20197.876.695.48
20188.296.585.66
20175.864.974.19
20167.736.023.97

In the past five years Volume Weighted Average Price (VWAP) has increased by 6.0% to SGD6.39. Based on a dynamic start date of five years ago, there have been declines in VWAP in 2 out of 5 years.

SECTION 5 ONGOING BEARISH PARAMETERS

5.1 Performance:

+ Return on Capital Employed 6.8% [9.2%].

5.2 High Debt Indicators:

+ Total Liabilities/EBITDA of 14.2 compares unfavourably with the Joseph Piotroski benchmark of 5.

5.3 Declining ADVT past five years

Avg. Daily Volume Traded 12 months ended Feb 14, million shares

YearADVT
20203.5
20193.8
20184.4
20175.2
20165.4

In the past five years, Average Daily Volume of Trading (ADVT) has decreased 36.1% to 3.5 million shares.

5.4 Declining Average Daily Turnover

Past five years, 12 months ended Feb 14 (SGD million)

YearAverage Daily Turnover
202021.5
201924.8
201829.0
201725.9
201631.8

In the past five years, average daily share turnover has decreased 32.5% to SGD21.5 million (US$15.5 million). This suggests decreased liquidity.

SECTION 6 KEPPEL SUMMARY FINANCIALS

6.1 Dividend History

Trailing 12 months dividend for the 12 months ended February 14 has deteriorated from 48.0c in 2016 to 23.0c in 2020.

6.2 Financials Summary

Year endedDec 2018Dec 2017Dec 2016
Sales (USD B)4.34.35
Pretax (USD M)892.8317.9759.6
Net (USD M)679.6141.2564.5
EPS (SGD)0.520.1080.432

+ Net profit was up 381.5% from US$141.2 million in 2017 to US$679.6 million in 2018.

+ Earnings Per Share (EPS) was up 381.5% from 10.80c to 52.0c.

6.3 Quarterly Report: Key Parameters

Quarterly Report Analysis Q3 2019: Keppel reports 3.8% sequential rise in Quarterly Net Profit


Release Date: October 24, 2019

Keppel (SI:BN4), announced net profit of SGD159m ($US115m) for the quarter-ended 30 September 2019, up 3.8% from the previous quarter and down 29.7% from the year-earlier period. Earnings per share (EPS) were up 4.8% sequentially from 8.4c (US6.15c) in Q2/2019 to 8.8c (US6.37c) in Q3/2019.

Quarter-ended30 Sep [Q3/2019]30 Jun [Q2/2019]31 Mar [Q1/2019]
EPS, c8.88.411.0
Sequential growth in EPS %4.76-23.6457.14
Revenue, SGD billion2.11.81.5
Revenue, $US billion1.51.31.1
Sequential growth in Revenue %15.8516.58-
Net Profit, SGD million159153203
Net Profit, $US million115111147
Sequential growth in Net Profit %3.84-24.4-

Compared with the previous corresponding period [PCP; Q3/2018], year-over-year [y.o.y.] EPS was down 29.6%, Revenue was up 59.6% and Net Profit was down 29.7%.

Quarter-ended30 Sep [Q3/2019]30 Sep [Q3/2018]
EPS, c8.812.5
PCP growth in EPS %-29.6-16.67
Revenue, SGD-1.3billion
Revenue, $US-938million
PCP growth in Revenue %59.55-19.86
Net Profit, SGD million159227
Net Profit, $US million115164
PCP growth in Net Profit %-29.71-14.52

Major changes compared with previous corresponding period [Year-on-Year]:

Unfavourable Changes:

- Net profit slumped 29.7% from SGD226.6m ($US165.8m) to SGD159.3m ($US115.3m)

- EBIT to Sales down from 25.9% to 11%

- Profit before tax to Sales down from 25.9% to 11%

- Profit after tax to Sales down from 17.5% to 7.7%

- EBITDA to Sales down from 22.5% to 5.9%

Currency Conversion (September 30, 2019): $US1 = SGD1.38

Currency Conversion (September 30, 2018): $US1 = SGD1.37

6.4 Annual Report: Key Parameters

FY2018 Annual Report: Keppel Net Profit up 381%


Release Date: May 30, 2019

Keppel (SI:BN4) reported net profit for the year-ended 31 December 2018 of SGD944m ($US692m), up 381.5% from SGD196m ($US147m) in the previous year. Earnings per share (EPS) were up 381.5% from 11.0c (US8.23c) in FY2017 to 52.0c (US38.1c) in FY2018.

Major changes compared with previous year:

Favourable Changes:

- Profit before tax to Sales up from 7.4% to 20.8%

- Administration expenses to Sales down from 17.2% to 16.6%

- Working capital to total assets up from 19.2% to 20.6%

- Total non-current assets to Total Assets up from 45.9% to 47.8%

- Other non-current assets to Total Assets up from 23.3% to 26%

Unfavourable Changes:

- Total current assets to Total Assets down from 54.1% to 52.2%

- Long-term investments to Total Assets down from 13.7% to 12.4%

- Current Debtors to Total Assets down from 10.8% to 10.2%

- Total Liabilities to EBITDA of 14.2 compares unfavourably with the Joseph Piotroski benchmark of <5. However, it has improved by 80.5% from the previous year's ratio of 73.0.

- Net tangible assets per share down 2.9% from SGD6.47 ($US4.8) to SGD6.28 ($US4.6)

Note:

- Total revenue to total assets steady at 0.2

- Total liabilities to Total assets steady at 0.6

- Current ratio steady at 1.6

Annual Report [Year-on-year comparison: 2018 vs 2017]

Company Name : Keppel Corporation Limited (BN4)
December 312018201720182017Change
DescriptionSGD mSGD m$US m$US m(%)
Depreciation(182.4)(212.4)(133.6)(158.9)Improved 14.1
Working Capital5,491.65,500.34,023.84,115.1Down 0.2
Current Assets13,884.715,512.710,173.511,606.1Down 10.5
Current Liabilities8,393.110,012.46,149.77,491Down 16.2
Shareholders' Funds11,587.111,9738,4908,957.7Down 3.2
Total Liabilities15,019.216,712.611,004.712,503.8Down 10.1
Total Assets26,606.328,685.619,494.721,461.6Down 7.2
Current Debt1,480.81,714.11,0851,282.4Down 13.6
Non-Current Debt6,067.86,078.94,445.94,548Down 0.2
Total Debt7,548.57,7935,530.95,830.5Down 3.1
Cash and cash equivalents1,981.42,273.81,451.81,701.2Down 12.9
Operating Cash Flow124.81,20391.4900Down 89.6
Net Assets11,587.111,9738,4908,957.7Down 3.2
Net Tangible Assets11,458.111,840.48,395.58,858.5Down 3.2
AuditorPricewaterhouseCoopers LLP 

Year-on-year comparison of Per Share figures

December 312018201720182017Change (%)
DescriptionSGD SGD $US $US
Sales3.33.32.42.5Up 0.2
Cash116.1c135.4 cUS85cUS101.3cDown 14.3
Shareholders' Funds6.46.64.74.9Down 3.1
Total Liabilities8.39.26.16.9Down 10
Total Assets14.715.810.711.8Down 7.1
Current Debt81.6c94.3 cUS59.8cUS70.6cDown 13.5
Total Debt4.24.333.2Down 3
Net Tangible Assets6.36.54.64.8Down 2.9

Year-on-year comparison of Performance Ratios

December 3120182017Change (%)
Total debt to net tangible assets (%)65.965.8Up 0.2
Total Liabilities to EBITDA14.273Down 80.5
Debt/Equity (Steady % from 0.65 to 0.65)0.70.7Steady
Total Liabilities/Total Assets (Down 3.4% from 0.58 to 0.56)0.60.6Down 3.4
Current Ratio (Up 6.5% from 1.55 to 1.65)1.61.6Up 6.5
Common Size Ratios by Assets %
Total current assets to Total Assets 52.2 54.1 Down 3.5
Total non-current assets to Total Assets 47.8 45.9 Up 4.1
Other non-current assets to Total Assets 26.0 23.3 Up 11.5
Long-term investments to Total Assets 12.4 13.7 Down 9.2
Current Debtors to Total Assets 10.2 10.8 Down 5.3
Common Size Ratios by Sales %
Profit before tax to Sales 20.8 7.4 Up 181.0
Administration expenses to Sales 16.6 17.2 Down 3.6
Depreciation to Sales (3.1) (3.6) Up 12.9
Tax expenses to Sales (4.8) (4.1) Down 17.3

Currency Conversion (December 31, 2018): $US1 = SGD1.36

Currency Conversion (December 31, 2017): $US1 = SGD1.34

Five-year record of growth and performance:

In the last 5 years Total Revenue averaged SGD8.8B ($US6,453.4M), EBITDA averaged SGD1.6B ($US1,170.8M) and Net Profit averaged SGD1.2B ($US878.4M). Compound Annual Growth Rate (CAGR) averaged -15.0% for Total Revenue, -12.6% for Net Profit and -19.7% for EBITDA.

DescriptionAnnual (SGD M)Annual ($US M)5-year Avg (SGD B)5-year Avg ($US M)5-year CAGR %
Total Revenue5,964.84,370.58.86,453.4(15)
EBITDA1,057.5774.81.61,170.8(19.7)
Operating Profit1,239.9908.51.61,192.2(15.7)
Net Profit943.8691.61.2878.4(12.6)

Five-year record of EBITDA, Operating Profit, Net Profit, ROE, ROA and ROCE

In 2018 Net Profit Margin of 16.0% was above its 5-year Avg of 13.0% (All Figures in %)

Description20185-year Avg
EBITDA Margin17.717
Operating Profit Margin20.818.2
Net Profit Margin1613
Return on Equity8.38.6
Return on Assets3.64.1
Return on Capital Employed6.88.2

SECTION 7 CORPORATE PROFILE

7.1 Activities

Keppel Corporation is one of Singapore's leading and most diversified conglomerates. The publicly listed company, long controlled by the Singapore government, has undergone a thorough restructuring into the mid-2000s, and as a result has refocused on three core areas of operation: Offshore & Marine; Property; and Infrastructure. Offshore & Marine represents the company's largest component, generating some 61 percent of the group's SGD 3.96 billion ($2.4 billion) in 2004 revenues. Offshore & Marine includes subsidiaries Keppel FELS and Keppel Shipyard, and ranks among the world's largest shipbuilders and is the world leader in the construction of jack-up rigs for the offshore oil industry.

7.2 Top Management

The chief executive officer is Loh Chin Hua.

7.3 Issued Capital and MCap

Based on 1,820,000,000 issued shares the market capitalisation is SGD12.2 billion (US$8.8 billion).

7.4 Vanguard Total World Stock ETF 7670:

The stock was one of 7670 global stocks selected by Vanguard Total World Stock ETF (VT). As at Nov 30, 2019, the Vanguard Total World Stock ETF held 469,613 shares worth $US2,352,892 or 0.01% by value of the ETF's portfolio [Ranked 1222 out of 7670 by value and 6 out of 83 for Singapore].

COMPANY IDENTIFIERS

Contact: 65 62706666

Physical Address: 1 HarbourFront Avenue #18-01 Keppel Bay Tower Singapore, 098632 Singapore

State/Province/Country: Singapore

Country of Incorporation: Singapore

Exchange: Stock Exchange of Singapore

Business Sector: Industrial Conglomerates

Industry Group: Industrial Conglomerates

Industry: Industrial Conglomerates

Activity: Industrial Conglomerates

Economic Sector: Industrials

ISIN: SG1U68934629

SI:BN4; SGX:BN4; SP:BN4; KPLM.SI

PermID: 4295887849

RIC: KPLM.SI

Keppel Corp, Keppel Corp Ltd

Source: www.BuySellSignals.com