DnB Nor upgrades Keppel, SembMarine to buy

Stock Name: Kep Corp
Company Name: KEPPEL CORPORATION LIMITED

Research House: DnBNOR Markets

Price Call: BUY

Target Price: 10.00

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: DnBNOR Markets

Price Call: BUY

Target Price: 4.70

DnB Nor Markets has upgraded Singapore oil rig builders Keppel Corp (KPLM.SI) and Sembcorp Marine (SCMN.SI) to “buy” from “hold.” However, it has cut Keppel’s target price to S$10.00 from S$10.65 and Sembcorp Marine’s to $4.70 from $5.30.

Keppel’s shares have fallen 22% since early August, while Sembcorp Marine’s have lost 30% in the same period, which represents a good entry point for investors, DnB Nor said. 

“We expect the offshore and marine ordering cycle to normalise, with sufficient demand to fill the slots at top-end yards such as Sembcorp Marine and Keppel,” DnB Nor said in a report.

However the brokerage noted that risks for investors include further weakness in the equity markets, which would put downward pressure on their shares.

“We argue that the current market outlook for the offshore industry remains positive and that the oil and gas cycle is longer-term in nature, with oil companies looking beyond short-term volatility,” said DnB Nor.

At 9:31 a.m., shares of Keppel were 0.7% lower at $0.855, and have fallen about 17% since the start of the year.

Shares of Sembcorp Marine fell 3.2% at $3.67, and have dropped 31.5% since the beginning of the year.