Strong results but no special dividend — Results beat expectations, but focus will be on the absence of a special dividend, which is widely anticipated by the Street – reflected in the 12% rally over the past week. We see profit-taking risks and recommend buying on weakness. We will review our target price and earnings estimates after more details are available.

2Q09 results review — Revenue +8% QoQ and +21% YoY mainly driven by O&M (higher order book recognition) and property (higher percentage completion for Reflections). O&M EBITDA margin at 13.3% is a positive surprise and the highest since 1Q05. Profit reached $318m, above our $260m forecast. Net cash of S$1.3bn was boosted by sale of SPC stake, but FCF remained negative on higher working capital. Interim DPS of S$0.15 was declared (in-line with ours), equal to 40% payout (see Figure 2 for results details).

O&M updates — YTD, new orders stood at S$345mn (vs. our S$2.3bn estimate and $5.4bn in 2008); Keppel believes order book could pick up in 2H09, mainly for NOCs, but conceded competition remains intense. Keppel sees opportunities to participate beyond semi-subs to include drillships in Brazil and is cautiously optimisic of its likelihood of securing orders for the 28 drilling units and 8 FPSOs due to be tendered.

Infrastructure update – Keppel’s recent win in Tianjin amounting to S$22.3mn may be small, but the long-term potential should not be under-estimated given the potential of the Tianjin Binhai New Area. Keppel's expertise in green technology should position itself well for future contract wins.