Keppel Corporation (KEP SP) - DBS Research 2017-08-18: Sells Keppel Lakefront (Nantong); Divests Partial Stake In Vessel

Keppel Corporation (KEP SP) - DBS Vickers 2017-08-18: Sells Keppel Lakefront (Nantong); Divests Partial Stake In Vessel KEPPEL CORPORATION LIMITED BN4.SI

Keppel Corporation (KEP SP) - Sells Keppel Lakefront (Nantong); Divests Partial Stake In Vessel

  • Divestment of Keppel Lakefront (Nantong) to yield S$75m gains in 3Q17.
  • Partial sale of stake in Golar Hilli Episeyo could realise up to gains of S$26m in 2Q18.
  • This is in line with Keppel’s strategy to recycle capital and rebalance its portfolio to focus on high growth cities.
  • Maintain BUY; TP S$7.60.



What’s New 

  • Keppel announces two divestments: 
    1. 100% interest in Keppel Lakefront (Nantong) Property Development to China Vanke; and 
    2. 5% interest in Hilli Episeyo, its first floating liquefied natural gas vessel (FLNG) conversion, to Golar LNG Partners. 

Divesting Keppel Lakefront (Nantong); disposal gains of S$75m in 3Q17. 

  • Keppel is divesting its entire 100% interest in Keppel Lakefront (Nantong) Property Development Co Ltd (Keppel Lakefront) to Nantong Wanjun Commercial Information Consultancy Co. Ltd., a subsidiary of China Vanke Co. Ltd for a total consideration of RMB1.43bn (approximately S$292m). 
  • Spanning a total land area of 167,051 sqm, phase 1 of the project, which comprises of 111 landed homes and 10 street‐side commercial units, was completed in 2015 and more than half of the 111 landed homes have been sold as of end Jul-2017.
  • The transaction is expected to yield net divestment gains (inclusive of exchange rate gains) of about RMB368.5m (approximately S$75m) upon completion by end-Sept 2017.
  • This is in line with Keppel’s strategy to recycle capital and rebalance its portfolio to focus on high growth cities.

Sale of 5% stake in Hilli Episeyo to be completed by Apr- 2018. 

  • Keppel is selling 5%, or half of its current 10% interest, in the world’s first FLNG conversion - Hilli Episeyo to Golar LNG Partners LP (Partnership). This is in conjunction with Golar LNG (Golar)’s Master Limited Partnership structure for the Partnership to acquire an equity interest in the vessel.
  • The divestment gain attributable to Keppel is expected to be in the range of US$17-19m (approx. S$23-26m) based on the indicative selling price. 
  • Keppel acquired the 10% stake for a mere US$50 consideration in Sept-2014, and as part of the deal, Keppel extended a shareholders' loan of US$21.7m to Golar Hilli then.
  • Upon completion, which is expected to be by Apr-2018, Keppel will continue to hold 5% equity interest in Hilli Episeyo, and 10% interest from cash flow generated from the vessel. 
  • Keppel’s stake in Hilli Episeyo strengthens the alignment of strategic interests between Keppel and partner, Golar, and reflects Keppel's confidence in the prospects of FLNG vessels. Golar is expected to activate the construction of second FLNG vessel contracted with Keppel in the next few months.


Maintain BUY; TP S$7.60. 

  • We continue to like Keppel as a proxy to ride on property and offshore & marine recovery.




Pei Hwa HO DBS Vickers | http://www.dbsvickers.com/ 2017-08-18
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 7.600 Same 7.600



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