2 biggest risks Keppel must keep an eye out on

Chinese yards remain a threat.

According to Barclays, a surprising subtlety in Keppel's recent contract was the provision of the 20:80 payments terms given to RIG by Keppel, reversing Keppel's previous stance that it was unwilling to provide such terms to its customers.

Here's more from Barclays:

Given the intense competition from China and Korea and the blue-chip quality of RIG, we believe these were key reasons Keppel had for offering/accepting these payment terms. The c16% increase in pricing from the previous 3 units delivered to RIG bodes well for the margin outlook of these rigs, in our view.

Key risks: 1) The increasingly competitive landscape from the rising competition from Chinese yards may limit contract pricing upside or contract orders; and 2) the quality of the current order backlog may be impacted by margins from Brazil contracts.

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