Singapore Share Investment : Keppel upgraded for contract novation

CIMB is overhauling Keppel to "hold" from "lessen" after the rigbuilder says the agreements with Transocean for the five Super B lift apparatuses will be novated to Borr Drilling at US$216 million ($302 million) per fix. 

That is nearly at a zero rebate to its unique cost of US$219 million for every apparatus. 

"We think the Borr contract is a decent reference point for 'feasible esteem" of undelivered apparatuses... Be that as it may, there could in any case be some disability in 2017 for retiring of Singapore yards," says examiner Lim Siew Khee in a Tuesday report. 

Keppel FELS on Monday night said it had gone into a consent to novate the five Super B high particular raise fixes as of now being worked by Keppel FELS for Transocean to Borr Drilling at US$1.1 billion. 

This is a piece of the activity of Borr Drilling to gain Transocean's whole armada of lift apparatuses for US$1.35 billion involving 10 existing apparatuses and five under development at Keppel FELS. 

Under the new terms, the initial three apparatuses will be conveyed in 2017-2018, while the staying two apparatuses will be conveyed in 2020. 

Each apparatus is currently evaluated at US$216 million rather than the first cost of US$219 million marked in 2013. US$275 million stores will be paid in the new terms, arranging for working capital. The initial three apparatuses are 75% finished while the staying two are under 20%. 

The US$1.35 billion bundle paid by Borr Drilling implies it is paying US$250 million for Transocean's armada of existing raise rigs including those that are frosty stacked. Six out of the 10 Transocean apparatuses are over 15 years old and five are around 4.5 years. 

Lim accept the 15-year-old apparatuses are evaluated at US$5 million, leaving the 4.5-year-old apparatus estimated at US$55 million, or a 70% markdown to cost. 

Still, Keppel could get right around zero markdown for its armada, which could be because of the quality and high-specs of Super B class. 

"We update Keppel to Hold from Reduce with a reexamined total of-parts valuation," says Lim, "Oversupply of apparatuses will at present be a shade and we are probably not going to see a surge all together force while ROE for Keppel Land has declined to c.6% and it need additionally reusing of capital." 

Shares of Keppel are exchanging 1 penny bring down at $6.84.

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