Keppel Corp: announces that its overseas yards have secured contracts worth $160m. i) Keppel Subic Shipyard has been awarded a contract from Shell Philippines Exploration BV (SPEX) to build a Depletion Compression Platform (DCP) to support the recovery of natural gas from the Malampaya gas field near Palawan island, in the Philippines. ii) In the Netherlands, Keppel Verolme has secured a contract from repeat customer Heerema Marine Contractors Nederland for the drydocking survey of the deepwater construction vessel Balder, one of the largest crane vessels in the world. The yard’s work scope incl painting of the hull, bracings and cranes. It will also undertake steel renewals as well as the maintenance and repairs to the tanks, incl piping and conservation works. The vessel is expected to be delivered in 1Q13. Separately, KEP confirms that it has entered into a termsheet agreement with Golar LNG to work together on the conversion of up to 3 LNG vessels into Floating LNG FLNG) vessels (recall, we mentioned this last Friday). Credit Suisse notes KEP will start with a Front End Engineering and Design (FEED) study in Nov ’12 to confirm the engg and work scope, and expects the conversion of the vessel to start in mid-’13 for delivery by 1Q15. The house estimates Golar’s invmt to be ~US$500m, vs other FLNG new build projects of US$2-3b. This compares with The Business Times estimate of invmt cost at US$600m. With the above contracts, KEP would have secured an est $9.7b of projects ytd, boosting its order book to $13.8b. Credit Suisse keeps its Outperform rating with TP $12.80. What is an FLNG? Similar to a Floating Production Storage Offloading (FPSO) type vessel used in the pdtn of oil, a FLNG allows for the pdtn of LNG at the offshore fields without the need to build fixed pipelines to transport natural gas to land based liquefaction plants. The use of a FLNG allows for the possibility of developing and monetisation of deepwater or remote gas fields, which would be economically or environmentally unviable to develop via constructing conventional gas pipelines to a land-based liquefaction facility. Such an arrangement may also provide for increased flexibility and shorter development times as compared to the use of conventional land-based facilities. There are no FLNG’s in commercial operation at present, though there are 10 projects in various stages of devt.

KepCorp: +2.0% at S$10.81, the best-performing STI component, after it said it may convert up to three liquefied-natural-gas vessels into floating LNG vessels for Golar LNG.DMG view the move positively and the award highlights the strength of Keppel in the conversion space.

A successful conversion of a FLNGV could potentially lead to more such projects.

House believe the shipyard value for the FLNGV could be as much as US$500m, depending on the scope of work, especially the procurement portion.

House keeps a Buy call with $13.80 TP. The stock's 10-day moving average around $10.86 may offer a cap.