KEPPEL CORPORATION LIMITED
BN4.SI
Keppel Corp (KEP SP) - Does Keppel need Cash?
Trying to raise cash?
- Bloomberg news suggests that Temasek is weighing options for Keppel. These might involve Keppel selling its 19% stake in M1 and 45% stake in Keppel REIT, worth SGD1.6b combined; or a rights issue.
- Separately, Keppel is selling its stake in Fernland Investment which owns a Vietnam office building for USD10.9m.
- With a net gearing of 0.5x in FY15, the market believes Keppel has the balance sheet to weather the O&M downturn. But we suspect that part of its cash may not be readily available to O&M in FY16.
- Maintain SELL and SGD4.24 SOTP TP, given its near-term O&M overhang.
O&M not so cash-generative anymore
- O&M used to be its cash cow with most of its earnings upstreamed to the group to fund dividends and other businesses. This explains its stagnant NAV since FY12.
- But its FY15 NAV shrank from SGD2.3b in FY14 to SGD1.4b, despite PATMI of SGD481m. This suggests considerable net cash outflows to the group, likely for taking KepLand private and dividend payments.
- Cash generation was also hampered by backend-loaded rig payments and delayed deliveries. It is highly possible that O&M does not have much cash left to support its working capital in FY16, unless clients pay up.
KepLand’s acquisition drained cash
- Keppel’s privatisation of KepLand in 2015 was a big cash drain. We think that a large portion of the group’s SGD1.9b cash as at end-FY15 may be residing in its property arm.
- We cannot verify if this could be readily available to O&M, as:
- some may be proceeds from property presales; and/or
- the cash may not be in Singapore.
- Greater clarity may emerge when the company releases its annual report.
Several cash avenues
- KeppeI may have a slight cash deficit, based on our calculations, if it does not touch the cash deposited in its property subsidiaries.
- But it has an immediate SGD398m cash need for its final dividends. Unless rig clients pay up, it may need to consider other cash sources.
- We do not rule out debt or equity fund-raising, asset sales or capital recycling.
Yeak Chee Keong CFA
Maybank Kim Eng
|
http://www.maybank-ke.com.sg/
2016-01-27
Maybank Kim Eng
SGX Stock
Analyst Report
4.24
Same
4.24
