KEPPEL CORPORATION LIMITED (SGX:BN4)
Keppel Corporation - Significant Number Of Acquisitions In 2022 Positions Keppel For The Future
- Keppel Corporation (SGX:BN4), together with its subsidiaries, has spent over S$3.2b on stakes in infrastructure assets globally to position itself for growth after the planned divestment of its offshore marine unit which is expected in 4Q22.
- Two key acquisitions in 2022 include the European onshore and offshore wind power assets as well as a waste management business in South Korea, with KIT taking key stakes.
- Maintain BUY.
Keppel Corp - Putting in place the foundations for the next stage of growth.
- Thus far in 2022, Keppel Corporation has announced a slew of initiatives and acquisitions that, in our view, are intended to set the stage for the company’s next stage of growth. Refer to the summary of Keppel Corporation's M&A and key activities this year in the report attached below. We calculate the total growth capex involved at more than S$3.2b at either the Keppel Corporation level or at its subsidiary or associate level.
- Focused growth on the infrastructure segment. We highlight that all of the growth capex to date has been on the infrastructure segment. In our view, this is understandable given that its offshore & marine segment is in the process of being divested and activity in its key business segment of China real estate has been on enforced hiatus given the country’s “zero-COVID” strategy.
- In our view, the key acquisitions year-to-date were the onshore and offshore wind power acquisitions in Europe and the waste management business in South Korea, where Keppel Corporation’s 18%-owned subsidiary Keppel Infrastructure Trust (SGX:A7RU) has taken key positions in.
Keppel Infrastructure Trust (SGX:A7RU) – A key growth engine.
- With over S$6.1b in assets under management across 12 businesses and concession assets that are underpinned by strong secular trends, Keppel Infrastructure Trust as a business trust appears to have strong DPU growth momentum over the next 2-3 years.
- Note that Keppel Infrastructure Trust’s 1H22 results were strong with 2.7% y-o-y DPU growth and 10% y-o-y EBITDA increase.
- One of Keppel Infrastructure Trust’s key acquisitions this year was S$900m in wind power acquisitions in Europe; with its cashflow visibility and 28 years of economic life, these assets appear to be very timely given the electricity travails that the region is suffering from as a result of the Russian-Ukraine war.
Keppel Corp - Earnings forecast revision and recommendation
- Keppel Corp's share price has been well-supported by its share buyback programme. Keppel Corporation is near the end of its current S$500m share buyback mandate, having already spent S$492m to buy back 74.8m shares (average purchase price of S$6.58/share) or 4.2% of its outstanding shares.
- Refer to the report attached below for details of SOTP-based valuations for Keppel Corporation. We retain our BUY rating on Keppel Corporation with unchanged SOTP-based target price.
- Keppel Corporation appears to be at an interesting crossroads in 2022, with the exit of its KOM segment and it moving towards a more asset-light and recurring earnings business model, and towards its 15% ROE target vs 9.1% in 2021 and 1H22 annualised ROE of 8.4%. Of interest will be the pace of its asset monetisation which could bolster earnings again in 2022 and thus lead to another dividend surprise.
- See
- Catalysts:
- Continued growth in AUM of its asset management business,
- property market recovery in China, and
- earnings accretive investments in its infrastructure segment.
Adrian LOH
UOB Kay Hian Research
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https://research.uobkayhian.com/
2022-09-12
SGX Stock
Analyst Report
10.110
SAME
10.110
