Money Talk: Cosco, OUE Hospitality Trust, Keppel

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. Cosco Corp

Broker: OCBC

Cosco reported a 17 per cent year-on-year rise in revenue to $1.16 billion and a 69 per cent increase in net profit to $7.1 million in the third quarter of 2014 (3Q14), such that net profit for the first nine months of 2014 (9M14) accounted for 76 per cent and 69 per cent of ours and the street's estimates, respectively.

With the recent announcement regarding the delay in delivery of the Sevan 650 unit, the group currently has three offshore projects that have already been cancelled or are at risk of cancellation.

Looking ahead, margins may be pressured even further as the group executes lower-priced contracts. This does not augur well for a company with a net gearing of 1.3x and that is still scaling the offshore learning curve.

Given Cosco's weak execution abilities, relatively poorer quality clientele, and deteriorating balance sheet amidst a slowing offshore market, we lower our price to book value from 1.0x to 0.8x, resulting in a lower fair value estimate of 50 cents.

Maintain SELL with lower fair value of 50 cents

2. OUE Hospitality Trust

Broker: CIMB

OUE-Hospitality Trust's results for 3Q14 are in line with our forecast, with distribution per unit (DPU) for 3Q and 9M accounting for 24 per cent and 71 per cent of our full-year forecast, respectively.

With nearly two-thirds of its earnings fixed from retail rent and hotel master lease, OUE-HT is well positioned to offer growth while being more stable than its peers.

Maintain ADD with unchanged target price of 96 cents.

3. Keppel Corp

Broker: OSK-DMG

Keppel has won a US$240 million contract for a KFELS Super B Class jack-up rig from The Bank of Tokyo-Mitsubishi UFJ, which will be operated by Japan Drilling Corp (JDC). This is Keppel's second such rig for JDC, the first having been delivered in 2013.

Keppel's share price has retreated 15 per cent in the last three months as oil prices slid 25 per cent, and the company is now being priced at 11x price to earnings and 5x EV/EBITDA (enterprise value/earnings before interest, taxes, depreciation, and amortization) going forward with an attractive 5.1 per cent dividend yield.

The oil market is still structurally firm for shallow-water assets, and Keppel remains one of the strongest rig-builders in the world

Maintain BUY with a target price of $12.60