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Would Benjamin Graham Buy Keppel Corporation Limited?

Earlier this week, Keppel Corporation Limited (SGX: BN4) reported that its third-quarter profits were down 9% compared to a year earlier.

The world’s largest jackup rig builder enjoyed gains of 27% in its pre-tax profits from its offshore and marine segment. Unfortunately, these gains were obliterated by falls of 37% in profits from its property division.

October, it would appear, has been a tough month for Keppel Corporation. Having started the month at S$10.48, shares in the company have fallen to S$9.66 a share. This is closer to its 52-week low of S$9.37 rather than its high of S$11.38.

With the market in “fearful” mode, some value investors might suggest  that now is the time to be greedy. So how does Keppel Corporation stack up as a value share?

Keppel boasts a healthy earnings yield of close to 11% and rewards investors with an equally tempting dividend yield of around 4.3%. Recent falls in the share price has boosted the potential returns for those investors contrarian enough to “bet” against the market.

As last week’s biggest loser among the 30 Straits Times Index (SGX: ^STI) components, Keppel could seem relatively cheap. A price-to-earnings ratio (PER) of just nine is certainly low for a stalwart of the benchmark index. It is also quite some way below the market average of 14.

Despite revenues falling recently, Keppel still has a balance sheet that appears to be in good shape. The company’s total debt is well below its book value and also below the net current asset value. A current ratio of around two certainly doesn’t paint a picture of a company that deserves to be treated harshly by investors.

There is unquestionably uncertainty in financial markets at present. That has led to stock markets to wobble. But has Keppel been treated particularly unfairly?

I think it might because it is more important for investors to pay attention to the long term. That means it is better to focus on a company’s fundamentals rather than get sucked in by markets sentiments, which can, as we know, change from one day to the next.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Adam Kuo doesn’t own shares in any companies mentioned.