Keppel Corp: Hong Bao surprises? : Kim Eng

Keppel Corp will be releasing its FY07 results this evening. Kelive
expects the group to turn in pre-exceptional net profit of S$1,030m
(4Q:
S$272m), which is slightly below market consensus estimates of
S$1,050m.
Including exceptional gains from revaluation of investment properties
will lift earnings to a whopping S$1.22bn.

Capital structure remains sub-optimal given its low net debt/capital
ratio of 0.08x, down from 0.24x in FY06. With a record profit already
in
the bag, we believe Keppel can well afford to give out bumper
dividends
without contraining its funding requirements. If we assume Keppel
increase
its payout ratio from 53% to 85% this year, we think it will have
no problems paying out final dividends of $0.56 per share versus
consensus
of $0.11-0.43 per share - net of the declared interim dividend of
$0.09/share
in 1H07.

SM Goh is currently in Doha, Qatar from 28-31 Jan to officiate the
groundbreaking of Keppel's $1.5bn Doha North Sewerage Treatment Works
and we note that he will be be leaving after Keppel Corp unveils its
full-year results on Thurs. Keppel spearheads Singapore's interests
in
Qatar and we do not discount the possibility of the group announcing
a
major deal or JV in the presence of SM.

On technicals, there is a gap following Keppel Corp sharp fall on 16
Jan. We
expect Keppel Corp to cover this gap in near term, suggesting a
possible
upmove toward $11.94 in near term.