Keppel Corporation - RHB Invest 2020-05-29: Working Towards An Integrated OneKeppel; BUY

KEPPEL CORPORATION LIMITED (SGX:BN4) | SGinvestors.io KEPPEL CORPORATION LIMITED (SGX:BN4)

Keppel Corporation - Working Towards An Integrated OneKeppel; BUY

  • Still BUY with new SGD7.30 Target Price from SGD7.40, 22% upside and c.3% FY20F yield.
  • Management held an analyst teleconference to provide highlights of its Vision 2030 initiative. We are bullish on the future Keppel Corp – which is seen as a global leader in creating low-carbon smart cities – with a 15% ROE target and as a sustainable company.



Redefining Keppel Corp’s divisions.

  • Going forward, Keppel Corp (SGX:BN4) will segment its divisions into: Energy & environment (offshore & marine (O&M), infrastructure, renewable energy, and Kris Energy (SGX:SK3)), urban development (property, urban solutions, and Tianjin Eco-City), connectivity (M1, data centres, and logistics), and asset management. See Keppel Corp Announcements.


Keppel Corp’s business approach

  • Keppel Corp’s business approach will be to pursue strategic M&A, make selective divestments to free up its balance sheet, utilise its capital recycling model, and focus on growing recurring income.
  • Management believes a higher percentage of recurring income will help Keppel Corp attract a better earnings multiple, which we agree. However, the recurring income target was not disclosed.


ROE target is 15%.

  • By 2030, Keppel Corp aims to allocate a higher percentage of shareholders’ funds into energy & environment and asset management.


“OneKeppel”

  • Management sees Keppel Corp as an integrated “OneKeppel” instead of a conglomerate with different business segments. This is consistent with the “hunt as a pack” strategy. The likely outcome will be Keppel Corp being valued by the market close to SOP, in our view, with a minimal conglomerate discount.


Cut earnings forecasts

  • Although the teleconference did not touch on the near-term earnings trend, we take the opportunity to cut earnings forecasts. This is because we factored in a greater impact from COVID-19, particularly for the O&M space. However, the longer-term potential is good, as management works on its Vision 2030.
  • Even after the earnings cut, Keppel Corp trades at an undemanding 16x FY20F P/E, falling to an attractive 12x FY21F P/E.


Value-unlocking potential.






Leng Seng Choon CFA RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-05-29
SGX Stock Analyst Report BUY MAINTAIN BUY 7.30 DOWN 7.400



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