Salomon Brothers backs Keppel
SALOMON Brothers is recommending the shares of the three Philippine-based Keppel operations - Keppel Philippines Holdings, Kepphil Shipyard and Cebu Shipyard and Engineering Works - predicting they will see strong growth this year and next.
In the company's latest marine research report, titled 'Keppel Philippines - fundamentally attractive', senior analyst Loke Wai-yin says: 'The Singapore-based Keppel Group has invested significantly in the ship repair and related industries in the Philippines, which face good growth prospects in the short and long term.
'Despite being relatively undeveloped and fragmented, the Philippine ship repair industry is of strategic importance because the country consists of many islands, making it reliant on domestic shipping.
'In the short to medium term, the large and ageing Philippine domestic fleet provides a strong baseload of business activity for the yards.
In the longer term, more foreign demand is expected as shipowners become increasingly attracted by the lower cost of ship repair, improved efficiency and a broader spectrum of supporting industries in the country.
'The increase in foreign demand for ship repair should certainly benefit the Keppel Group, which is reputed to command the lion's share - about 80-90 per cent - of the Philippine shiprepair market,' Ms Loke says.
Salomon Brothers favours Kepphil Shipyard most because of its superior trading liquidity.
Cebu Shipyard stands to benefit from the buoyant inter-island shipping.