Money Talk: Keppel Corp, Singapore market strategy, Singapore banks

SINGAPORE - Stay up to date on market chatter with our picks of the latest broker research reports, compiled by The Straits Times Money Desk.

1. Keppel Corp

Broker: CIMB

There is a six-month gap between Keppel Corp's latest jack-up rig order and the last one that it won in March 2014 . This could signal slowing order momentum from this segment of the value chain, in our view.

However, we are comforted that the latest rig contract from Gulf Drilling International is still on a milestone basis. Keppel's diversified offshore and marine portfolio will keep the yards busy until 2017, as we estimate that its order book stands at around $15.3 billion.

Order wins year to date stand at around $4.4 billion, in line with our $6 billion order target for the year.

Our target price of $13.20 is unchanged. Maintain Add. Catalysts include stronger orders and margins.

2. Singapore market strategy

Broker: OCBC

Despite Tuesday's correction for the Straits Times Index, equities are still up for the year.

We expect equities to remain in favor, despite higher interest rates concern ahead, backed by several positive factors including a recovering global economy, still-healthy corporate earnings, cash-rich US corporates which will fuel mergers and takeovers, and relatively low corporate debts.

We are expecting several positive factors to drive interest in the first half of 2015 and the quiet Q4 2014 is an opportune time to undertake a stock pick strategy and establish positions for a H1 2015 pick-up.

We are overweight on the banks and continue to like DBS and UOB, with DBS as our top pick in the sector. Other stocks on our Buy list include CapitaLand, Ezion, FCT, Hotel Properties, Keppel Corp, Keppel Land and Wheelock.

3. Singapore banks

Broker: Maybank Kim Eng

Cases of expensive homes sold at significant losses have stoked fears of more to come, potentially crimping banks' profitability. But history tells us that even during 1998-2003 when Singapore and Asean were buffeted by major economic setbacks, housing non-performing loan (NPL) ratios stayed below 5 per cent.

Hard lessons learned, the impact should be more manageable in another major crisis. UOB should be the most vulnerable, OCBC is next and then DBS.

The authorities have taken proactive steps since end-2009 to curb residential-property speculation, tightening their measures in response to changing circumstances. Strong employment should also reduce the chance of runaway housing NPLs. The strong financials of property developers this time around imply a lesser need for aggressive price cuts that could dampen market sentiment. Lastly, a gradual and modest increase in interest rates should provide sufficient time for higher interest rates to work their way through the system.

We expect the banking sector to escape largely unscathed from this housing-market slowdown. DBS remains our top pick, as it should be best positioned to benefit from rising rates. We stay cautious on OCBC.