KEPPEL CORPORATION LIMITED (SGX:BN4)
Keppel Corporation - Temasek Offer – Prelude For Restructuring; BUY
- Maintain BUY with new SGD7.80 Target Price from SGD7.18, 34% upside plus c.4% yield.
- Temasek’s announcement of a cash partial offer for 30.55% of Keppel Corporation shares points to the current market price being undervalued. If successful, Temasek will end up with an aggregate 51% shareholding in Keppel Corporation.
- We believe the partial offer raises the possibility of restructuring at Keppel Corporation, which could unlock value. As such, we lower our conglomerate discount to 13% (from 20%), which leads to a higher target price.
Temasek is offering SGD7.35/share in cash to acquire an additional 30.55% stake in Keppel Corp.
- Upon completion, Temasek will own 51% stake in Keppel Corporation (SGX:BN4). The intention is for Keppel Corporation to remain listed on SGX.
- The partial offer can only be made after the pre-conditions (including domestic and foreign regulatory approvals) have been fulfilled or waived, and this may take several months.
- The partial offer represents an opportunity for shareholders to realise part, or potentially all, of their investment at a premium over the last traded price prior to the announcement.
- The partial offer is successful if:
- Of the total number of shares voted (Temasek is not eligible to vote), more than 50% are in favour of the partial offer; and
- At least 30.55% of the shares are tendered into the partial offer, such that Temasek holds 51%.
- Following the successful close of the partial offer, Temasek intends to work with Keppel Corporation’s board of directors to undertake a comprehensive strategic review of the company’s businesses, with the objective of creating sustainable value for all shareholders.
- See Keppel Corp Announcements; Keppel Corp Latest News.
Valuation.
- Diversified asset structure with huge value unlocking potential.
- Keppel has multiple businesses in different industries, and we use the SOP methodology for valuation, before arriving at a new Target Price of SGD7.80/share based on a 13% conglomerate discount, vs a previously higher 20% discount.
- See Keppel Corp Share Price; Keppel Corp Dividend History.
Leng Seng Choon CFA
RHB Securities Research
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https://www.rhbinvest.com.sg/
2019-10-22
SGX Stock
Analyst Report
7.800
UP
7.180
