KS Energy (KSE) reported a 44.1% YoY rise in revenue to S$59.8m and net profit of S$46.7m in 2Q14 compared to S$1.5m in 2Q13. Earnings were boosted by a S$54.4m gain on disposal of PPE; recall that the group had sold its rights and obligation under the jack-up rig contract (KS Orient Star 1) for US$84.88m in Jun this year. Excluding this, we estimate a core net loss of about S$7m in the quarter. Looking ahead, the group remains positive on the outlook for its drilling business, while it expects its distribution business to remain an integral part of its overall performance. Pending more details from management, we maintain our HOLD rating but put our fair value estimate of S$0.50 under review.
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