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Keppel Corporation - OCBC Investment 2022-04-28: Reaches Agreement With Sembcorp Marine On Long-Awaited Merger

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

Keppel Corporation - Reaches Agreement With Sembcorp Marine On Long-Awaited Merger

  • Outperformer so far this year (based on 26 Apr 2022 close).
  • Signs definitive agreements for proposed combination of Keppel O&M and Sembcorp Marine (SGX:S51) and realising value from the transactions.
  • Positive deal for Keppel Corp; significant step with regards to asset monetisation efforts.



Outperformer so far this year

  • Since the start of the year, Keppel Corp's share price has appreciated by about 30% (based on the closing price of S$6.66 on 26 April 2022), significantly outperforming the broader Straits Times Index.
  • Besides the strong earnings announcement for the financial year to end-Dec 2021 (FY2021), during which Keppel Corp reported net profit of S$1.02b (highest achieved in the past six years since the O&M downturn), the sector has been buoyed by better industry fundamentals.


Signs definitive agreements for proposed combination of Keppel O&M and Sembcorp Marine

  • It has also been announced that Keppel Corp and Sembcorp Marine have signed definitive agreements for the proposed combination of Keppel O&M and Sembcorp Marine. The combined entity will be combined with a restructured Keppel O&M through a separate scheme of arrangement of Keppel O&M. Following this, Keppel O&M and Sembcorp Marine will become wholly-owned subsidiaries of the combined entity.
  • Concurrently, Keppel O&M will sell its legacy rigs and associated receivables to an asset company that will be 10%-owned by Keppel Corp and 90%-owned by other investors, and transfer other out-of-scope assets to Keppel Corp.

Breakdown of shareholding

  • Keppel Corp and its shareholders would own 56% of the Temasek will hold 33.5% and be the largest shareholder of the combined entity.


Realising value from these transactions

  • According to management, the proposed transactions, on a pro-forma basis, would allow Keppel Corp to deal for Keppel Corp, and see it as a significant step with regards to its asset monetisation efforts.


Proposed combination subject to various approvals and will take time; EGMs in 4Q22






OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2022-04-28
SGX Stock Analyst Report BUY MAINTAIN BUY 8.78 UP 7.000



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