Nomura has downgraded its rating on Keppel Corp ( Financial Dashboard) to “reduce” from “buy” and cut its price target from $13.20 to $9.64, based on a sum-of-parts valuation.

The Japanese broking house expects a significant slowdown next year in global jack-up rig orders, and its FY2014 to FY2016 earnings estimates for Keppel are 7% to 18% below consensus forecasts.

“The key downside risk to consensus forecasts is the optimism on Keppel’s ability to replenish its rig building order book quickly and grow its offshore and marine revenue vs our view that the slowing jack-up rig orders since early 2014 will worsen in 2015,” Nomura analysts Chong Wee Lee and Abhishek Nigam said in a note today.

Keppel’s proprietary semi-submersible rig designs are unlikely to benefit from an expected recovery in orders for floaters from 2Q2015 as drill ships are preferred, they said.

Global jack-up rig orders may weaken next year because of near-term oversupply, with a 71% y-o-y rise in scheduled jack-up rig deliveries to 65 units in 2015, they said.

Of the 65 units, only 8% have been contracted.

Average charter rates for jack up rigs have also declined, while utilization rates peaked at 88.6% in April this year.

“This may affect Keppel’s order book visibility.”

The “saving grace” for Keppel’s offshore and marine division is that higher-margin offshore and conversion works and ship repair jobs provide a steady income to the group, they said.

“We expect 65% of Keppel’s order wins in 2015 to be related to conversion works on production units, which are insufficient to make up for the revenue dip from rig building projects.”

Shares of Keppel traded at $10.28, down 0.2%, at 0252 GMT.