Keppel Corporation - OCBC Investment 2016-09-19: Divests stake in Shanghai development

Keppel Corporation - OCBC Investment 2016-09-19: Divests stake in Shanghai development KEPPEL CORPORATION LIMITED BN4.SI

Keppel Corporation - Divests stake in Shanghai development

  • Keppel Corporation’s wholly-owned subsidiaries, Keppel Land China and Alpha Investment Partners Limited (Alpha), have recently signed an agreement to divest their 80% stake in Sparkle Bright Holdings Limited which owns Life Hub @ Jinqiao (a mixed-use development in Shanghai) to Star Champ Development Limited, a wholly-owned subsidiary of the Chongbang Group, which owns the other 20% stake in the development. 
  • Keppel Land China holds a 42.5% interest, while Alpha and a co-investor hold the remaining 57.5% interest in the 80% stake in Sparkle Bright. The total consideration of the divestment is US$516.9m, and a ~ S$73m gain for Keppel Corp is expected after the divestment is completed in end Sep. 
  • Since Keppel acquired its stake in 2013 in the development, asset enhancement works have been undertaken, allowing the group to realise an IRR of over 20% on the sale. 
  • Though we maintain our HOLD rating with S$5.68 fair value, we note KEP’s stock has declined to more palatable levels, and investors may look to accumulate on dips; downside risks include oil price weakness and negative newsflow from Brazil.




Low Pei Han CFA OCBC Investment | http://www.ocbcresearch.com/ 2016-09-19
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 5.68 Same 5.680



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