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Brokers' take

This article is more than 12 months old

Compiled by Cai Haoxiang

KEPPEL CORP | BUY

JUNE 8 CLOSE: $6.38

TARGET PRICE: $7.36

OCBC Investment Research, June 8

In FY2016, property contributed $620 million in net profit (79 per cent), followed by infrastructure at $99 million (13 per cent), investments at $36 million and offshore and marine at $29 million.

The general outlook for property markets in Asia remains positive in the long term, driven by continuing urbanisation.

Keppel's residential landbank here and overseas total 8.4 million sq m of gross floor area, translating to a pipeline of about 66,000 homes, mostly in China and Vietnam.

The group has also diversified into other segments, such as office, retail and lifestyle developments overseas.

In the infrastructure segment, Keppel is involved in energy and environmental infrastructure (Keppel Infrastructure), as well as data centres and logistics (Keppel T&T).

With Keppel Capital, the group is also able to connect investors with high-grade real assets such as data centres, power and desalination plants and LNG (liquefied natural gas) vessels.

Co-investments also allow the group to grow faster without putting a strain on its balance sheet. Therefore, we expect to see the asset management business gain increasing prominence in the group.

Maintain "buy" with fair value estimate of $7.36.

HUPSTEEL LIMITED | NON-RATED

JUNE 8 CLOSE: $0.795

CIMB Research, June 7

Hupsteel plays a bridging role between steel mills and end-users, as a steel stockist here with a track record of more than 70 years in supplying industrial hardware to the marine, oil and gas, construction and other industries.

The group has a diversified base of close to 500 customers regionally. Some of its well-known customers include Keppel, Sembcorp Industries, Unocal and Gas Malaysia.

At end-Q3 FY2017, Hupsteel's current assets comprised $55 million cash, $13 million receivables and $25 million inventory, against total liabilities of merely $4 million, leading to net current asset value of $90 million versus Tuesday's market cap of $88 million.

According to its FY2016 annual report, estimated fair value of the group's investment properties (all freehold) was about $80 million, much higher than their stated book value of $34 million based on historical cost.

After six straight quarters of reported net losses, Hupsteel returned to slight positive net profit of $0.5 million in Q2 FY2017, aided by a leaner cost structure and stabilised average selling prices.

Hupsteel has a history of paying consistent dividends.

It bought back 741,600 shares (0.6 per cent of total issued shares) from the market over the last 12 months, with the latest purchase on May 29 at $0.71 to $0.715 a share.

Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss arising from any use of the information published herein.