Keppel Corp - UOB Kay Hian 2016-01-26: Creates Keppel Capital to position its investment division for growth

SGinvestors.io

KEPPEL CORPORATION LIMITED BN4.SI 

Keppel Corp creates Keppel Capital to position its investment division for growth

• Keppel has announced a restructuring exercise to consolidate its asset management businesses (AUM: S$26b) under Keppel Capital and grow its asset management business. 
• Keppel has 4 subsidiaries in asset management namely: 
  1. Keppel Infrastructure Fund Management (the Trustee-Manager of Keppel Infrastructure Trust) 
  2. Keppel DC REIT Management (the manager of Keppel DC REIT) 
  3. Keppel REIT Management (the manager of Keppel REIT) 
  4. Alpha Investment Partners (a fund manager) 

Rationale of Restructuring 

1. Strengthens Keppel's recycling platform to unlock value. 
2. Increases velocity of new vehicle launches across asset classes (no equity and bond businesses). 
3.  Expands platform for co-investing. 
4. Enhances investment returns from improved vehicle performance. 
5. Generates recurring income from management fees. 

Our Take - 

• By consolidating the various asset management businesses under one entity, it will sharpen Keppel's focus on growing its investment division. 
• This is one of its 4 core business segments (the others 3 being offshore & marine, property and infrastructure)..
• The asset management businesses made a net profit of S$60m in 2015. Excluding non-recurrent earnings, the profit level was lower. 

Valuation/ Recommendation 

• No change in our valuation. We maintain our BUY call and target price of S$6.05.

Nancy Wei UOB Kay Hian | Foo Zhiwei UOB Kay Hian | http://research.uobkayhian.com/ 2016-01-26

UOB Kay Hian Analyst Report BUY Maintain BUY 6.05 Same 6.05