Asia Pacific Equity Research

23 April 2010

Overweight
Keppel Corporation KPLM.SI, KEP SP
Price: S$9.97
1Q10 review: solid results on O&M margins; all
Price Target: S$11.00
attention now on Petrobras' upcoming bid

• 1Q10 earnings 10% better than expected on O&M margins: Singapore

Keppel Corp reported a 1Q10 net profit of S$322 million, up 13% y/y. Conglomerates & Multi-industry
This was 10% better than J.P. Morgan’s estimate of S$293 million. Ajay Mirchandani
AC

Key reasons for the better-than-expected earnings was the continued (65) 6882-2419
margin expansion at its O&M segment which saw 1Q10 O&M ajay.mirchandani@jpmorgan.com
margins at 16.2% (highest levels ever seen). However as highlighted J.P. Morgan Securities Singapore Private
Limited
by the company, such margin levels are unlikely to be sustainable in
long term. We are raising our 10E/11E earnings by 6%/2% to Price Performance
reflect better FY10E/FY11E O&M margins of 13.2%/12.4%.
9
• Deepening “footprint” with new yards in Brazil, Azerbaijan and S$ 7
Middle East; Green Trust on track for 2Q10 listing: To reinforce
5
its “Near Market, Near Customer Strategy” and given increasing
Apr-09 Jul-09 Oct-09 Jan-10 Apr-10
emphasis on local content needs, Keppel has been deepening its
KPLM.SI share price (S$
presence in key markets such as Brazil (acquired OSV yard in Santa FTSTI (rebased)
Catarina), Caspian (10% stake in Baku yard in Azerbaijan), and the YTD 1m 3m 12m
Middle East (likely to be operational in Qatar by 4Q10). Keppel also Abs 20.6% 11.1% 21.1% 68.7%
confirmed its green trust listing is on schedule for a 2Q10 listing. Rel 17.6% 7.9% 15.4% 7.0%

• PBR’s 28-rig bid date likely to be pushed back to June/July?

Keppel to focus on (a) two PBR-owned rigs, and (b) driller-owned
rigs in our view. While PBR’s 28 rigs are officially up for bidding in
May, we believe we are likely to see a further delay possibly to
June/July. We continue to believe the Singapore rig builders are well
positioned, with Keppel likely to focus on (a) two semi-subs (owned by
PBR), and (b) driller-owned rigs (again likely to be SS) as this would
enable it to earn higher margins. We believe Keppel is likely to win 1-4
rigs (best-to-worst-case scenario assuming all 28 are built in Brazil).
• Price target, valuation, key risks: Our SOTP-based Dec-10 PT of
S$11 implies 14.8x 2010E earnings and a 3.5% dividend yield. Key
risks to our PT remain a worse-than-expected delay in new orders and
collapse in oil prices.

Reuters: KPLM.SI; Bloomberg: KEP SP

S$ in millions, year-end December
FY08 FY09 FY10E FY11E
Net profit 1,098 1,265 1,188 1,050 52-week range(S$) 5.65-9.97 Free float (%) 78
EPS (S$ cents) – year-end 69.0 79.1 74.3 65.7 Market cap (S$ mn) 15942 (S$/US$) 1.37
EPS growth Y/Y % 6.4% 14.6% -6.1% -11.6% Market cap (US$ mn) 11612
DPS (S$ cents) 35.1 38.0** 38.0 38.0 Share outstanding (MM) 1599
P/E (x) 14.4 12.6 13.4 15.2 Avg daily value (S$MM) 54
EV/EBITDA (x) 11.4 8.8 7.6 7.9 Avg daily value (US$MM) 39
Price to book (x) 3.5 2.7 2.4 2.3 Avg daily volume (MM ) 8
Dividend yield 3.5% 3.8% 3.8% 3.8% Performance 1M 3M 12M
ROE 22.4% 23.9% 18.9% 15.5% Absolute (%) 11.1 21.1 68.7
RoCE 13.7% 15.9% 16.5% 13.6% Relative (%) 7.9 15.4 7.0
Source: Company, Bloomberg, J.P. Morgan estimates **Note: Including special DPS, total DPS for FY09 stands at S0.61.

See page 11 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may
have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision.
Ajay Mirchandani Asia Pacific Equity Research
(65) 6882-2419 23 April 2010
ajay.mirchandani@jpmorgan.com

Company Description P&L sensitivity metrics EBITDA EPS

impact (%) impact (%)
Keppel Corporation key businesses include Sales volume growth assumption 4% 4%
Offshore & Marine, Property and Impact of each 5% 5% 6%
Infrastructure. Its offshore and marine Gross margin assumption 15% 15%
business is the global market leader in the Impact of each 1% 7% 8%
construction of offshore rigs i.e. jack-ups Capacity utilization assumption na na
and semi-submersibles. On the property Impact of each 5% na na
side, it is involved in property development Debt/equity assumption net cash net cash
primarily via 53%-owned Keppel Land. Its Impact of each 10% na na
infrastructure business comprises Source: J.P. Morgan estimates
environmental engineering, power
generation, logistics and network
engineering. Price target and valuation analysis
Our Dec-10 S$11 PT is based on sum of the parts with DCF-based calculation
for rig-building business and a 9.5x P/E for ship repair and other businesses.
We believe 9.5x is in line with the historical average of repair business. We
value property (Keppel Bay, Keppel Land) at a discount to NAV (according to
Revenue (FY09) our property team). Finally we value the infrastructure business at 2.2x book.

Risk free rate: 3.0%

Market risk premium: 4.5%
Beta: 1.2
Debt/equity: 42.9%
Cost of debt: 4.5%
Terminal “g”: 2.5%

At our PT, Keppel would be trading at 14.8x FY10E earnings and a 3.5%
Source: Company reports dividend yield. We believe this is fair given the limited near-term outlook on the
order book. Key risks to our price target include a stronger-than-expected
EPS: J.P. Morgan vs consensus order-book outlook and momentum and worse-than-expected order
J. P. cancellations.
Morgan Consensus

FY10E 0.74 0.66

FY11E 0.66 0.65
Source: Bloomberg, J.P. Morgan.

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Ajay Mirchandani Asia Pacific Equity Research
(65) 6882-2419 23 April 2010
ajay.mirchandani@jpmorgan.com

1Q10 review: O&M margins continue to rise

1Q10 earnings 10% better than expected on O&M margins: Keppel Corp
reported a 1Q10 net profit of S$322 million, up 13% y/y. This was 10% better than
our estimate of S$293 million. A key reason for the better-than-expected earnings
was continued margin expansion at its O&M segment which saw 1Q10 O&M
margins at 16.2% (the highest level ever seen). However these margin levels are
unlikely to be sustainable in long term. We raise our 10E/11E earnings by 6%/2%
respectively to reflect better O&M margins with FY10E/FY11E O&M margins at
13.2%/12.4%.
Table 1: 1Q10 vs 1Q09
S$ in millions, %
1Q10 1Q09 % y/y J.P. Morgan comments
Revenue 2,473 2,978 -17% Mainly due to a 30% decline in revenues coming from O&M segment, partially
offset by higher growth in property segment
Materials & subcontract costs (1,647) (2,257) -27%
Staff costs (312) (311) 0%
Depreciation & amortization (44) (41) 9%
Other operating expenses (62) (54) 15%
EBIT 407 315 29% Largely driven by growth in O&M EBIT margins up from 12.1% in FY09 to 16%
in 1Q10
Investment income 0 0 107%
Interest income 18 13 34%
Interest expense (17) (12) 39%
Share of associates/JV profit 57 84 -32%
Exceptionals 0 0 na
Profit before tax 465 400 16%
Tax (89) (74) 21%
Net profit 376 326 15%
Minority interests (54) (41) 31%
PATMI 322 285 13%
Exceptionals 0 0 na
PATMI (recurring) 322 285 13%
EPS – reported (S$) 0.20 0.18 13%
EPS – recurring (S$) 0.20 0.18 12%
Source: Company, J.P. Morgan

EBIT margin for the O&M in 1Q10 was around 16.2% versus 10.4% in 1Q09.

Figure 1: O&M segment - EBIT margin

%

18% O&M - EBIT margin 16.2%

16% 13.8%
14% 12.8%
11.8%
12% 10.0% 10.3% 9.8% 10.1% 10.0% 10.4%
8.6% 9.9% 9.3%
10% 8.7% 8.8% 8.2%
8%
5.2%
6%
4%
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10

Source: Company reports

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Ajay Mirchandani Asia Pacific Equity Research
(65) 6882-2419 23 April 2010
ajay.mirchandani@jpmorgan.com

Table 2: Breakdown by segment

S$ in millions, %
1Q09A 1Q10A y/y % FY10E % of FY10E
Revenue 2,978 2,473 -17% 11,071 22%
- O&M 2,119 1,493 -30% 7,406 20%
- Property 222 355 60% 1,771 20%
- Infrastructure 634 624 -2% 1,854 34%
- Investments 3 1 -67% 39 3%

EBIT 315 416 32% 1,750 24%

- O&M 220 242 10% 974 25%
- Property 60 138 130% 702 20%
- Infrastructure 37 39 4% 74 52%
- Investments (2) (3) 41% 0 nm

EBIT margin (%) 10.6% 16.8% 15.8%

- O&M 10.4% 16.2% 13.2%
- Property 27.1% 38.9% 39.6%
- Infrastructure 5.8% 6.2% 4.0%
- Investments nm nm 0.0%

PATMI (recurring) 285 322 13% 1,188 27%

- O&M 182 205 13% 738 28%
- Property 34 84 149% 310 27%
- Infrastructure 30 31 4% 118 26%
- Investments 40 2 -95% 21 9%

PATMI margin (%) 9.6% 13.0% 10.7%

- O&M 8.6% 13.7% 10.0%
- Property 15.2% 23.7% 17.5%
- Infrastructure 4.7% 5.0% 6.4%
- Investments 1315.7% 200.0% 54.9%
Source: Company, J.P. Morgan

Table 3: Segmental net profit performance breakdown

S$ in millions
Segments 1Q10 1Q09 y/y % J.P. Morgan comments
Offshore & Marine 205 181 13.3% Driven by higher operating margins rising to 16.2% from 10.4% due to increased
productivity and cost efficiency
Infrastructure 31 30 3.3% Lower revenues from EPC contracts in Qatar offset by higher revenue from co-gen
power plant in Singapore.
Property 84 34 147.1% Due to (1) higher profit from Keppel Bay and other residential projects, and (2)
sale of residential homes in China, Vietnam, Indonesia and India
Investments 2 40 -95.0% Included contribution from SPC (disposed in June '09) in 1Q09 which reflects
steep decline year on year basis
Total 322 285 13.0%
Source: Company, J.P. Morgan

Table 4: Summary of earnings estimate changes for FY10/11

FY10E - Old FY10E- New % change FY11E - Old FY11E- New % change
PATMI 1,123 1,188 6% 1,030 1,050 2%
- O&M 654 738 13% 579 620 7%
- Property 310 310 0% 298 298 0%
- Infrastructure 118 118 0% 109 109 0%
- Investments 41 21 -48% 43 23 -46%
Source: Company, J.P. Morgan estimates.

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Ajay Mirchandani Asia Pacific Equity Research
(65) 6882-2419 23 April 2010
ajay.mirchandani@jpmorgan.com

Key conference call takeaways

Solid operating margin of 16% in 1Q10 but unsustainable in the long term
Keppel highlighted the cost control initiatives carried out during the downturn
combined with increased productivity facilitated the better-than-expected margins in
1Q10. Moreover building many assets of similar design also helped in this regard.
However, Keppel looks at the current margin as unsustainable in the long term.
O&M – order book outlook improving
Keppel highlighted orders are returning in the offshore and marine sector although
Keppel does not anticipate the same high as the previous peak but level of enquiries
has continued to be healthy.
O&M – new yard investments
Keppel highlighted its yard investments / acquisitions in (a) Brazil (Santa Catarina
Yard), (b) Baku, Azerbaijan and (c) Middle East to reinforce its “near market near
customer” strategy. Total capex associated is approximately US$50 mn.
Contribution of property segment should increase over time
The Management appeared very positive on the outlook of the property segment and
expects its contribution to the overall profit to grow over time.
Expanding and diversifying energy business
Keppel highlighted that it is in the process of tendering 400MW Keppel Merlimau
co-gen plant expansion. The company expects the construction to start by the end of
2010 and the operations to commence in 2013.
K-Green Trust listing is on track for 2Q10 listing
Keppel Group said that they are currently having discussions with the regulators
regarding K-Green Trust listing and expects it to happen in 2Q10.
Logistics expansion plans
Given the improving trend in logistics, the Group indicated that they are now
planning to put their footsteps into the key growth markets in Asia Pacific including
China, Vietnam and Indonesia, with the main focus being distribution, marketing and
warehousing in these areas.
Table 5: Keppel Corp: Valuation Computation
S$ million, per share
KEPPEL CORP - SUM OF PARTS VALUATION
Listed entities: Stake Price / Factor Valn Per share

Keppel Telecommunications & Transportation 80% 1.48 657 0.41

k1 Venture 36% 0.17 133 0.08
Market valuation of listed entities (ex-property) 789 0.49
DCF valuation of Offshore & Marine 8,813 5.51
DCF valuation of existing orderbook only 696 0.44
Business value of offshore-conversion 6,214 3.89
Ship repair & others 1,903 1.19
Petrobras 'Option value' 1735 1.09
DCF valuation of Infastructure business (ex-Kep T&T) 2.2 1,803 1.13
DCF valuation of Keppel Bay property project 0% 894 0.56
Keppel Land 53% 0% 2748 1.72
K-REIT 31% 1.12 481 0.30
14,899
Less: Net cash/ (debt) -- (excluding cash advances) at
O&M level 350 0.22
Fair value of Keppel Corp 17614 11.02
Price target 11.00
Source: JPMorgan estimates; price date: as of 22th April 2010

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Ajay Mirchandani Asia Pacific Equity Research
(65) 6882-2419 23 April 2010
ajay.mirchandani@jpmorgan.com

Order-book, New Orders trend and historical P/E Band

Figure 2: Historical new orders wins on quarterly basis
S$ million

4,000 3,491 3,564

3,500 2,865
2,760 2,659
3,000
2,500 2,173 2,318
2,000 1,441 1,308 1,600 1,600
1,194 1,200
1,500 929 924 1,035
1,000 600 646 700
529
248 316 315
500 30 85
-
1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

3Q05

4Q05

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10
Source: Company reports

Figure 3: Net order book

S$ million

14000 12,200 11,800 13,000 13,000

11,300 11,100 10,800
12000 10,500
9,900
9,300 9,800 9,300 9,452
10000
7,200 7,678
8000
5,772 5,586 5,812
6000
4000
2000
0
4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10

Source: Company reports

Figure 4: Forward P/E trading range

25
During 2005-1H2008, the average P/E was 15x with a
maximum level of 21x and minimum level of 12x…..
20

….currently the stock is trading at 13.4x '10E earings

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Source: JPMorgan estimates

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Ajay Mirchandani Asia Pacific Equity Research
(65) 6882-2419 23 April 2010
ajay.mirchandani@jpmorgan.com

Keppel to list “green” infrastructure business trust

Keppel Corporation, on 26 January 2010, announced the proposed listing of its
business trust known as “K-Green Trust” (KGT) by 2Q10, with an aim to invest in
“green” infrastructure assets in Singapore and globally with a focus on Asia, Europe
and the Middle East. The listing will be sponsored by Keppel Integrated Engineering
Limited (KIE), a wholly owned subsidiary of Keppel Corp.

Additionally, Keppel proposed a dividend of in specie of approx. 50.5% of total

issued units of KGT, distributed in the ratio of one KGT unit for every five Keppel
shares owned. Following KGT’s listing, KIE will retain ~49.5% of the units.
According to the company, the book value of KGT, as at 31 December 2009,
amounts to S$750 million (book value of assets)

Assets transferred to KGT (seed assets)

As of today, KIE has transferred the following three assets into KGT:

Table 6: Assets transferred into KGT

Seed Assets
Senoko WTE Plant
Tuas WTE Plant
Ulu Pandan NEWater Plant
Source: Company reports
Description
Acquired by KIE from the Singapore Government in August 2009 and has a
capacity to treat 2,400 tonnes of waste per day
First WTE plant to be built under public-private partnership, with a capacity to
treat 800 tonnes of solid waste per day to generate more than 20MW of green
energy
Singapore's fourth and largest NEWater plant with a capacity to produce
148,000 m3 of NEWater per day

Potential Yield on listco?

We believe the yield will range from 3-5%, lower than the yields on REITs as well
as trusts listed in Singapore

Figure 5: K-Green Trust : Current Asset components

Source: Company

7
Ajay Mirchandani Asia Pacific Equity Research
(65) 6882-2419 23 April 2010
ajay.mirchandani@jpmorgan.com

Summary of Sino-Singapore Tianjin Eco-City

Project Overview
The Tianjin Eco-City is a large scale township project between China and Singapore
with private sector investment and development. The aim of this project is to develop
a landmark eco-city in Tianjin Binhai New Area (40 km away from the Tianjin city
centre) which would be socially-harmonious, environmentally-friendly and resource-
efficient.

This project is developed by Sino-Singapore Tianjin Eco-City Investment and

Development Co Ltd. (SSTEC), a 50/50 joint venture company between the
Singapore Consortium led by the Keppel Group, and the Chinese Consortium led by
Tianjin TEDA Investment Holding Co Ltd. The total gross land area of the site is
~30 sq km, comprising of ~80% residential and ~20% commercial development and
has an expected completion period of 10-15 years. The initial start-up area is ~4 sq
km, expected to be completed in 3-5 years (detailed in the table below).

Table 7: Tianjing Eco-City Development Plan

Tianjin Eco-City Entire Development Start-up Area (SUA)
Size 30 sq km 4 sq km
Development period 10-15 years 3-5 years
No. of homes >100,000 >20,000
Population (approx.) 350,000 85,000
Source: Company reports.

Keppel Corp implied ownership
in the total project is 38% and in
the Singapore Consortium -75%
Shareholding Structure
The Tianjin Eco-City is a 50/50 JV between the Singapore and the Chinese
Consortium. The Singapore Consortium is led by Keppel Group with a 90% stake
and the rest 10% is taken by Singbridge International Singapore, a wholly owned
subsidiary of Temasek holdings Ltd.

Keppel Corp, Keppel Land and Keppel Integrated Engineering (a wholly owned
subsidiary of Keppel Corp) has 45%, 35% and 20% share, respectively, indicating
Keppel Corp’s implied ownership in the Tianjin Eco-City project of ~38%. The
Chinese Consortium is led by Tianjin TEDA Investment Holding Co. Ltd. (Tianjin
TEDA).

Figure 6: Tianjin Eco-City shareholding structure

Tianjin TEDA Inv. Keppel Keppel Integrated Singbridge Intl.

Keppel Land
Holding Co. Ltd. Corporation Engineering Singapore
100% 45% 35% 20%
90% 10%

China Consortium Singapore Consortium

50% 50%

Tianjin Eco-City (JV)

Source: Company reports.

8
 Ajay Mirchandani
(65) 6882-2419
ajay.mirchandani@jpmorgan.com
Table 8: Tianjin Eco-City ongoing projects
Project Investment
(RMB billion)
Solar polysilicon
US$ 1 billion
production plant
International school and
0.9-1billion
residential apartments
Eco-Business Park
Eco Cultural Theme
Park
Conversion of QTZ
village into an upmarket
commercial development
and construction of 2nd
LRT station
Integrated riverfront eco-
neighborhood
Residential and
Commercial
Development
Mixed development
project
GEMS World Academy
0.14
(GWA) Tianjin
Eco-CBD
Eco-Industrial Park
Source: Company reports.
Asia Pacific Equity Research
23 April 2010
Tianjin Eco-City ongoing projects
Period Occupied Area Phase Date Partners / Sponsors Project Description
Located in the northern manufacturing “Eco-Silicon Valley”
Sembawang Engineers & Constructors (a wholly owned
15 (option of taking another 10 zone, to be developed in stages; annual production capacity
NA Phase 1 22-Jan-09 subsidiary of Punj Lloyd Limited, a India based leading
ha later) is 5k tons in the 1st stage, expandable by 2.5k tons after
engineering and construction group )
2010
First international school located near the sub-centre of the
School by 2011 Chiway Holding Group (Involved in education, land and
SUA, providing education ranging from pre-school to high
and residential 10 ha (residential project) Phase 1 13-Apr-09 property development) and EtonHouse International
school levels. Residential project comprises of around 1,300
project in 3-5 yrs Holdings (education oriented company)
apartments to be developed in stages over 3 to 5 years
Ascendas (Singapore-based commercial developer),
A business house for global clean technology and green
PV World (Singapore-based manufacturer of wafer-
2 5-6 years 30 Phase 1 3-Jun-09 R&D companies as well as high value-added services such
based photovoltaic solar modules) and First DCS
as BPO companies which have low carbon footprint
(district cooling service provider)
100-ha (residential & Eco-tourism hub in Tianjin Eco-City, integrated with high-
Shimao Property Holdings (China-based foreign-funded
10 By 2014 commercial) Phase 1 1-Jul-09 end commercial, hotel and residential developments with
developers)
80-ha (public park space) sea views
"Live, work and play" community, with residential and
70-ha in
7 July 2009 commercial developments and eco-play hub offering a
Phase 1 and
13 By 2014 140 and 30 Dec Farglory Group (Taiwan’s largest property developer) variety of entertainment, retail, food & beverage and
70-ha in
2009 wellness facilities. Also involves linking of 2nd LRT station
Phase 2
to other developments within SUA
Exclusive high-end residential development at the riverfront
3 By 2013 40 Phase 1 13-Jul-09 Mitsui Fudosan (Japan’s largest developer) land plot, with a seamless connectivity of three adjacent
plots from the eco-valley to the riverfront
Residential and commercial development (includes ~5000
homes plus office and retail), managed by by Keppel Land;
NA NA 35.4 Phase 1 13-Aug-09 Keppel Corp (55%) and Keppel Land (45%) construction carried out in three stages. Phase 1
construction (includes 1,678 residential units) commenced
on 27 Nov 2009 and the sales launch is expected in 2Q10
Sunway City Berhad (Malaysia's leading property 88% residential and 12% commercial land development,
5 NA 40 Phase 2 27-Oct-09
developer) integrated seamlessly with the 3rd LRT station
International school located near the commercial centre and
Varkey Group (multi-faceted company involved in 1st LRT station of the Tianjin Eco-City’s Start-Up Area,
By 2011 NA NA 6-Nov-09
education, healthcare and construction) providing education ranging from pre-school to high school
levels
First-of-its-kind green central business district, applying an
Samsung C&T Corporation (a core part of Samsung
NA NA 68 Phase 2/3 1-Dec-09 integrated approach to green urban and architectural
group involved in construction and trading)
designs
A major hub for eco-manufacturing corporations that
Pan Asian Water Solutions Ltd. (PAWSL) and PV World
radiates out to the Bohai Bay region. PAWSL intents to site
4 5-6 years 130 NA 30-Dec-09 (Singapore-based manufacturer of wafer-based
its China headquarters in the Tianjin Eco-city with an
photovoltaic solar modules)
estimated investment of RMB 500 mm.
9
Ajay Mirchandani Asia Pacific Equity Research
(65) 6882-2419 23 April 2010
ajay.mirchandani@jpmorgan.com

Keppel Corp: Summary of financials

S$ in millions, year-end December

Profit and loss statement Cash flow statement

FY07 FY08 FY09 FY10E FY11E FY07 FY08 FY09 FY10E FY11E
Revenues 10,431 11,805 12,247 11,071 9,349 EBIT 1,051 1,238 1,505 1,750 1,580
EBITDA 1,176 1,378 1,679 1,896 1,732 Depreciation & amortisation 126 139 174 146 152
% change Y/Y 26% 17% 22% 13% -9% Other non-cash items 13 18 29 219 209
EBITDA margin (%) 11% 12% 14% 17% 19% Change in working capital 638 852 -910 -494 15
EBIT 1,051 1,238 1,505 1,750 1,580 Cash flow from operations 1,697 2,047 670 1,332 1,718
% change Y/Y 31% 18% 22% 16% -10% CAPEX -196 -305 -459 -415 -351
EBIT margin (%) 10% 10% 12% 16% 17% Disposal/ (purchase) 0 0 0 0 1
Net interest 29 4 29 55 66 Cash flow from investing -546 -171 424 -415 -351
Associates 477 354 322 215 205 Equity raised/(repaid) 39 34 8 0 0
Exceptionals 565 13 322 0 0 Debt raised/(repaid) -722 170 197 0 0
Earnings before tax 2,121 1,609 2,178 2,020 1,851 Other -244 -362 -8 -34 0
% change Y/Y 85% -24% 35% -7% -8% Dividends -242 -1,098 -574 -608 -608
Tax (469) (288) (348) (341) (300) Cash flow from financing -1,169 -1,256 -377 -642 -608
as % of EBT 22% 18% 16% 17% 16% Net changes in cash -18 620 717 275 760
Minority Interests (522) (223) (205) (492) (500) Beginning cash 1,615 1,597 2,217 2,936 3,210
Net income 1,131 1,098 1,625 1,188 1,050 Ending cash 1,597 2,217 2,934 3,210 3,970
Net income (recurring) 1,026 1,098 1,265 1,188 1,050
EPS (recurring) 0.65 0.69 0.79 0.74 0.66 Free cash flow 901 1,183 1,244 707 1,144
EPS (reported) 0.72 0.69 1.02 0.74 0.66 DPS 0.64 0.35 0.38 0.38 0.38

Balance Sheet Ratio Analysis

FY07 FY08 FY09 FY10E FY11E FY07 FY08 FY09 FY10E FY11E
Cash and Cash Equivalents 1,601 2,245 2,936 3,210 3,970 EBITDA margin (%) 11% 12% 14% 17% 19%
Accounts receivable 1,753 1,971 1,727 1,848 1,561 Gross margin (%) 11% 13% 15% 17% 17%
Inventories 2,791 3,217 3,178 3,017 2,548 EBIT margin (%) 10% 10% 12% 16% 17%
Others 1,142 657 744 744 744 Net profit margin (%) 11% 9% 13% 11% 11%
Current assets 7,287 8,090 8,586 8,820 8,823
LT investments 3,469 3,306 3,203 3,203 3,203 Sales growth (%) 37% 13% 4% -10% -16%
Net fixed assets 1,698 1,873 2,157 2,461 2,659 EBIT growth (%) 31% 18% 22% 16% -10%
Total Assets 15,797 16,746 17,307 17,845 18,047 Net profit growth (%) 51% -3% 48% -27% -12%
ST bank loans 503 198 839 839 839 EPS growth (%) 36% 6% 15% -6% -12%
Payables 3,072 3,940 4,052 3,694 3,120
Total current liabilities 6,641 7,872 7,264 6,730 5,989 Interest coverage (x) 17 16 30 26 24
Long term debt Net debt/equity (%) net net net net
1,732 1,745 918 918 918 -9% cash cash cash cash
Other liabilities 389 381 412 412 412
Total liabilities 8,762 9,998 8,594 8,061 7,319 Sales/Assets (%) 70% 73% 72% 63% 52%
Shareholder's equity 7,035 6,749 8,713 9,785 10,727 Assets/Equity (%) 316% 332% 322% 280% 264%
Total liabilities and equity 15,797 16,746 17,307 17,845 18,047 ROCE (%) 12% 14% 16% 17% 14%
BVPS 3.26 2.87 3.74 4.11 4.38 ROE (%) 22% 22% 24% 19% 15%

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Ajay Mirchandani Asia Pacific Equity Research
(65) 6882-2419 23 April 2010
ajay.mirchandani@jpmorgan.com

Analyst Certification:
The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily
responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with
respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report
accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research
analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the
research analyst(s) in this report.
Important Disclosures

• Client of the Firm: Keppel Corporation is or was in the past 12 months a client of JPMSI.

Keppel Corporation (KPLM.SI) Price Chart

Date Rating Share Price Price Target

28 (S$) (S$)
OW S$10.28 OW S$9.5 OW S$11
18-Oct-06 OW 7.36 9.28
OW S$10.09OW S$16.5 OW S$7 N S$7.9 OW S$9.7 24-Jan-07 OW 8.69 10.09
21
06-Mar-07 OW 8.30 10.28
26-Apr-07 OW 10.32 11.62
OW S$9.285OW S$11.62 OW S$17 OW S$16 OW S$12 N S$5.75 OW S$9.7
Price(S$) 11-Jun-07 OW 11.80 16.50
14
28-Sep-07 OW 14.30 17.00
31-Mar-08 OW 9.90 16.00
19-Sep-08 OW 8.00 12.00
7
23-Oct-08 OW 4.17 7.00
04-Apr-09 N 5.75 5.75
26-May-09 N 7.28 7.90
0
Oct Jul Apr Jan Oct
24-Jul-09 OW 7.83 9.50
06 07 08 09 09 23-Oct-09 OW 8.18 9.70
26-Jan-10 OW 8.22 9.70
Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
This chart shows J.P. Morgan's continuing coverage of this stock; the current analyst may or may not have covered it 13-Apr-10 OW 9.42 11.00
over the entire period.
J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.

Explanation of Equity Research Ratings and Analyst(s) Coverage Universe:

J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] J.P. Morgan Cazenove’s UK Small/Mid-Cap dedicated research
analysts use the same rating categories; however, each stock’s expected total return is compared to the expected total return of the FTSE
All Share Index, not to those analysts’ coverage universe. A list of these analysts is available on request. The analyst or analyst’s team’s
coverage universe is the sector and/or country shown on the cover of each publication. See below for the specific stocks in the certifying
analyst(s) coverage universe.

Coverage Universe: Ajay Mirchandani: Aboitiz Power (AP.PS), COSCO Corporation (COSC.SI), Energy Development
(EDC) Corporation (EDC.PS), Ezra Holdings Ltd (EZRA.SI), First Philippine Holdings Corporation (FPH.PS), Keppel
Corporation (KPLM.SI), Manila Electric Company (MER.PS), Manila Water Company Inc (MWC.PS), Noble Group Ltd
(NOBG.SI), Olam International Limited (OLAM.SI), Sembcorp Industries (SCIL.SI), Sembcorp Marine (SCMN.SI)

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Ajay Mirchandani Asia Pacific Equity Research
(65) 6882-2419 23 April 2010
ajay.mirchandani@jpmorgan.com

J.P. Morgan Equity Research Ratings Distribution, as of March 31, 2010

Overweight Neutral Underweight
(buy) (hold) (sell)
JPM Global Equity Research Coverage 45% 42% 13%
IB clients* 48% 46% 32%
JPMSI Equity Research Coverage 42% 49% 10%
IB clients* 70% 58% 48%
*Percentage of investment banking clients in each rating category.
For purposes only of NASD/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold
rating category; and our Underweight rating falls into a sell rating category.

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Ajay Mirchandani Asia Pacific Equity Research
(65) 6882-2419 23 April 2010
ajay.mirchandani@jpmorgan.com

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Ajay Mirchandani Asia Pacific Equity Research
(65) 6882-2419 23 April 2010
ajay.mirchandani@jpmorgan.com

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