Keppel Corp - SKDP avoids bankruptcy, but delays rig deliveries

According to Bloomberg, Skeie Drillling & Production ASA (SKDP) has avoided bankruptcy after bondholders agreed to a plan to rescue the company. Bondholders agreed to excuse 1.2b kroner (US$186m) in debt, the company will get 860m kroner (US$133m) in new equity and Keppel FELS will postpone the delivery of SKDP's three rigs under construction.

The total contract value of the three rig contracts is US$1.16b (S$1.78b).

We spoke to Keppel's management earlier. The company has collected 30-45% in payment. This implies S$1.1b still outstanding or 12% of existing orderbook of S$9.5b. The 30-45% payment collection is lower than our earlier estimate of 50% because the delivery dates of the rigs had been pushed back (no longer 1Q10, 3Q10 and 4Q10 respectively as per original company announcements).

We estimate the rig completion is 20%. With the latest news on SKDP, it would appear the delivery dates could possibly be postponed again. We will contact management for more details before lowering our earnings forecasts.

Maintain SELL on Keppel as share price is significantly above our target price of S$5.90. Our key concern remains the low contract wins of S$300m ytd. Orderbook will decline rapidly. Investors are far too optimistic on the recovery of E&P equipment orders amid the recent rally in oil price. Equipment orderflow typically lags oil price rally by 2 years.

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New iPhone to reach Singapore next month

A speedier version of the Apple iPhone will be docked at Singapore Telecommunications stores from July. As reported by BT on Monday, the Republic's largest operator scored a multi-year distribution deal with Apple that extends to both existing models as well as the impending upgrade. While the Apple-SingTel pact is not contractually exclusive, the gadget maker's strategy of using only one reseller in most countries means SingTel will retain its iPhone monopoly till 2010 at least.

Pricing remains unchanged from last year, with US operator AT&T charging US$199 for the new 16 GB (gigabyte) model and US$299 for the 32GB version. The company's existing 8GB iPhone 3G will continue to be sold but at a lower price of US$99.

Video recording, a feature found in most phones, will finally be supported in the iPhone 3GS, along with voice control and the ability to use the handset as a wireless modem for Web surfing. The phone's software will also be updated to allow users to send multimedia messages, copy and paste text and capture voice recordings. A SingTel spokesman said that current iPhone 3G customers can get this operating system upgrade for free from June 18.

Fraser & Neave Ltd - F&B resilient in recessionary environment

F&N's 2Q09 core net profit of S$99m was in line with expectations, forming 29% of consensus and our expectations. Positives were: 1) resilient F&B sales and margins; 2) improvements in property sales volume in China and Australia; and 3) positive rental reversions from a low base. This was offset by lower property presales in Singapore and disappointing P&P print volume. After Coke's withdrawal, management wants to launch new F&B products under the F&N brand name. Over 70% of the group's S$1.5bn maturing debt in FY09 has been refinanced and a rights issue is not on the agenda, says management. We roll over our RNAV estimate to end-CY10 to capture CY10 rental assumptions. We raise our FY09-11 core EPS estimates by 2-8% on higher rents and property development sales. Our target price, still pegged at a 20% discount to RNAV, rises from S$2.57 to S$2.98. With little upside potential, maintain Neutral.