Here’s why there’s still light at the end of the tunnel for Keppel

Its net gearing is well below peers’.

With the possibility of oil prices bottoming out at the US$20 levels in 1Q16, analysts believe that the market may be overly bearish on Keppel Corp (Keppel).

According to a report by KGI Fraser, Keppel’s bond yields

Further, regression analysis between oil prices and Keppel’s share price indicates that Keppel should be trading >$6 at these oil prices. KGI Fraser believes that as oil prices stabilize, Keppel’s share price should behave accordingly.

Meanwhile, Keppel’s property segment posted better-than-expected 1Q16 results. In addition, take up rates for its China and Singapore residential properties were and should continue to be robust.

“We expect this segment to contribute 50-60% of the group’s earnings in FY16. Over the next three years, Keppel has 3000-4000 units to be launched p.a. in China and 2000-3000 units in Southeast Asia, notably Indonesia and Vietnam. As a result, property earnings is expected to be one of its key drivers,” KGI Fraser states.

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