Keppel Corporation Ltd – Asset monetisation drives its valuation

 

 

The Positives

 

+ Urban development led the charge with 16.7% gain in sales. Keppel Land recorded 72% higher home sales to S$740mn, underpinned by strong China (+2.8x  YoY to 830 units) and India (+1.8x YoY to 800 units). It has increased focus on trading projects, which have faster turnaround and require lower working capital. About S$280mn was raised from the disposal of 3 assets in the Philippines, Myanmar and Vietnam. We believe Keppel Land remains the key earnings driver. It accounted for 44.8% of FY22 net profit.

 

+ Higher sales of power, renewables and energy-related services under a subscription model. Energy and environment posted 3% growth in revenue to S$1.03bn. In addition to higher sales from power and renewable energy, Energy-as-a-Service (EaaS) offering has gained traction with > S$320m subscriptions secured. The tenure, however, is not disclosed. This covers services such as energy supply, cooling services, energy optimisation and analytics and electric vehicle charging. Renewable generation capacity grew 9% since end-2022 to 2.8GW, of which 65% is operational.

 

+ Disposal of Keppel Offshore and Marine resulted in a gain of S$3,300mn. It has also distributed S$3,845mn worth of SembCorp Marine shares (equivalent to S$2.19/Keppel shares) to its shareholders at end Feb. About 5% of SMM shares are still held in escrow, equivalent to S$0.237/Keppel share.

 

The Negatives

 

+ Net gearing has risen to 0.83x from 0.78x at end 2022, due also to lower total equity after the distribution-in-specie.

Keppel Corporation – SMM shareholders clear way for divestment

 

The news

SMM shareholders have cleared the way for the proposed combination of KOM, voting overwhelmingly (95.28%) in favour of the acquisition.

 

Positives

+ Another step towards an asset-light business model. With SMM shareholders voting in favour of the acquisition, the completion of the KOM restructuring is expected to take place on or prior to 28 Feb 2023. We see the divestment of KOM, along with the divestment of Asset Co (previously approved by Keppel shareholders) as an important milestone for the Group as it continues its journey toward an asset-light model.

 

+ Focus shift towards transforming Urban Development business. With the divestment of KOM, we believe the attention will now shift towards the Group’s transformation of its Urban Development business. We believe the Group will pivot towards real estate-as-a-service solutions by having an asset-light model and one focused on strengthening its recurring income (67% of FY22 earnings).

Keppel Corporation – Urban Development weighs on FY22 earnings

 

 

Positives

+ $4.6bn in asset monetisation, on track to exceed $5bn by this year. Another ~$10bn in assets to be monetised. Keppel has unlocked $4.6bn in capital from asset monetisation since announcing its target to monetise $3-5bn within three years. We believe the Group is set to exceed this target by this year. Moving ahead, we believe Keppel will move to monetise another ~$10bn of assets it previously identified for monetisation. It had previously listed $17.5bn of assets it is seeking to monetise as part of its strategy to transform its Group to be more asset-light.

 

+ Write-back of $293mn of impairments for certain legacy rig assets. With improving offshore and marine market conditions, including recovery of oil prices, higher rig utilisation and day rates contracted, the Group has partially written back $293mn of impairments which had been made in 2020 for certain legacy rig assets. This raised the Group’s total realisable value from its proposed O&M transactions to $9.6bn (or $5.52 per share) from ~$9.3bn (or $5.34 per share) previously.

+ Asset management target raised to $200bn from $100bn previously. Having achieved its AUM target of $50bn at the end of 2022, Keppel has raised its previous target of growing its AUM to $200bn over time from $100bn previously. This segment is the fastest-growing segment of the Group and was the largest contributor to the Group’s net profit in FY22.

 

Negatives

- FY22 net profit below expectations, at 82% of FY22e profit. Net profit of $927mn (-9% YoY) was under our expectations as Urban Development continued to underperform due to headwinds from China’s property market. Contribution from the Sino-Singapore Tianjin Eco-City were also lower YoY, as there were no land sales in 2022, compared to the sale of a commercial and residential land plot in 2021.

Keppel Corporation – SMM announce EGM on 16 Feb 2023

 

The news

SMM has released a circular (link here) detailing the EGM to be held on 16 Feb, to vote on its proposed acquisition of Keppel’s offshore & marine unit.

 

Key highlights of the circular - The newly merged entity will have a new board and management team. Chris Ong, CEO of KOM, will replace Wong Weng Sun as CEO of the new merged entity. Mr Wong will remain as Senior Adviser to the new board for an unspecified period to facilitate a smooth transition. The existing SMM directors (except for Mr Yap Chee Keong, Deputy Chairman) will be stepping down upon the completion of the proposed combination to allow for a re-constitution of the Board.

 

The IFA are of the view that the terms of the proposed combination are fair and reasonable. It has recommended SMM shareholders vote in favour of the proposed combination.

 

Recall that based on the aggregate consideration of S$4.495bn for KOM (Deloitte, the independent valuer valued KOM at S$4.3-5.3bn), SMM will issue approximately 36.8bn new shares to Keppel at the issue price of S$0.122 per share.

 

Should the proposed transaction be approved by SMM shareholders, SMM expect the completion of the entire transaction on or prior to 28 February 2023.

 

Positives

+ Better clarity on the deal time-line and future management team will reduce overhang on stock. We believe the clearer roadmap for the merged entities will provide more clarity to shareholders and reduce the overhang on the stock.

 

+ New enlarged Group will be able to better capitalise on the energy transition. With Chris Ong, a veteran at the helm of the new enlarged Group, we believe the Group will be able to take advantage of opportunities in offshore renewables and new energy. Chris Ong has been the CEO of KOM since July 2017, and is concurrently the Managing Director of Keppel Renewable Energy.

 

Outlook

The divestment of KOM will further transition the Group towards an asset-light structure. More importantly, the new enlarged SMM entity, which Keppel will hold 5% of, will be better equipped to compete against global well-resourced players from South Korea and China.

 

With changes made to the Asset Co transaction, we believe management can now forge ahead to further de-risk its legacy rig assets. Management disclosed that it continues to receive active enquiries for its legacy rigs on the back of a more favourable environment. The completion of the Asset Co transation is expected to take place on or prior to 28 February 2023.

Keppel Corporation – Revised agreements will provide greater deal certainty

 

The news

Keppel has entered into revised agreements in connection with the proposed offshore and marine transactions. Under the revised structure and terms, Sembcorp Marine will now directly acquire 100% of Keppel O&M (excluding its legacy rigs and associated receivables) from Keppel. There will no longer be a Combined Entity, and the proposed one-for-one share exchange between the Combined Entity and SMM, and the transfer of SMM’s listing status to the Combined Entity. The exchange ratio between KOM and SMM is revised to 54:46 from 56:44.

 

The retained stake by Keppel is revised to 5% in the enlarged SMM, instead of 10% in the Combined Entity. This means that Keppel will distribute 49% of the enlarged SMM’s shares (instead of 46% in the Combined Entity) in-specie to its shareholders.

 

Keppel shareholders will receive an estimated 19.1 SMM shares per Keppel share based on the proposed issue price of $0.122/share with an implied value of $2.33. This is higher than the earlier indicated amount of 18.5 separate Combined Entity shares with an implied value of $2.26. In other words, Keppel shareholders will receive a higher upfront number of shares in SMM.

 

In addition, changes have been made to the Asset Co transaction. Keppel, Baluran and Kyanite, will proceed with the transaction regardless of the outcome of the proposed combination of KOM and SMM. Reflecting the higher interest rate environment, the parties have agreed that the coupon for the $3.9bn in vendor notes to be received by Keppel will be raised to 4% from 2%.

 

Both Keppel and SMM are targeting to complete the proposed combination by the end of 2022. Keppel intend to seek shareholders’ approval for the transaction in early-December 2022.

 

 

Positives

+ Decoupling of Asset Co transaction provides greater certainty on the outcome of its stranded rigs. The delinking of the Asset Co transaction from the proposed combination simplifies the transaction structure and allow the Group to move ahead with its plans to resolve the legacy rigs and associated receivables, regardless of the outcome of the proposed combination. The higher coupon rate for the vendor notes will also yield an additional $79mn of additional interest per annum, or about $236mn to $393mn over three to five years.

 

+ Better certainty of deal completion. The revised transaction structure benefits SMM shareholders as the acquisition consideration is reduced by $387mn or 10% of its market capitalisation. There will also be a lesser dilution to its existing shareholders with 3.1mn lower new SMM to be issued. The reduced transaction complexity and third party consent requirments would cut the completion time by up to two months. This is because the acquisition of KOM by SMM now eliminates the requirement for a separate combined entity to be interposed as the listed entity holding both KOM and SMM. In other words, the new terms would only require majority approval by Keppel and Sembmarine shareholders, and court approval will no longer be required.

 

+ On track to exceed $5bn of asset divestment by 2023. Keppel will be divesting Sheshan Riviera in Shanghai for RMB967mn (S$196mn), taking total assets monetised since 2020 to $4.4bn. Keppel will exceed the $5bn target by 1Q23 should the proposed transaction for the divestment of KOM go through in Dec 2022 or Jan 2023.

 

Negatives

+ Urban Development continues to drag. In its 3Q22 voluntary business update, Keppel reported improvements in all of its business segments except Urban Development. Urban Development continued to be weighed down by slower home sales in China and fewer new project launches. Management disclosed that net profit for 3Q22 was lower YoY as it benefited from enbloc sale of a project in China last year. The net profit was not provided in this voluntary update.

 

Outlook

The divestment of KOM will further transition the Group towards an asset-light structure. More importantly, the new enlarged SMM entity, which Keppel will hold 5% of, will be better equipped to compete against global well-resourced players from South Korea and China.

 

With changes made to the Asset Co transaction, we believe management can now forge ahead to further de-risk its legacy rig assets. Management disclosed that it continues to receive active enquiries for its legacy rigs on the back of a more favourable environment.

Keppel Corporation – De-risking inventory and deleveraging Keppel O&M

 

The news

Keppel has entered into an amended and restated framework deed with Borr. Under the new framework deed, KOM will accelerate the delivery of three yet-to-be delivered jackup rigs to Borr between October 2022 and July 2023. There are five rigs that have not been delivered yet.

 

The five rigs form part of the identified assets that are slated to be transferred to RigCo as part of the agreements in connection with the proposed combination of KOM and SMM. The deliveries of the remaining two rigs will be deferred to 2025 in which Borr will pay holding costs and cost cover in respect of the deferred deliveries.

 

Positives

+ Resolution for five rigs will de-risk KOM’s inventory and deleverage KOM. Keppel will receive cash payments earlier, which will reduce its overall financial exposure to Borr. All three jackup rigs will be delivered with full payments (including holding costs and cost cover) on delivery, amounting to at least US$352mn, out of which at least US$158mn will be payable in 2022. The new resolution will enable KOM to receive full payments for the three rigs faster, improve its cash flows, reduce counterparty risk and provide a resolution to its legacy rigs. The sale proceeds will be transferred to Asset Co upon completion of the combination, in line with the framework agreement.

 

+ No impairment will be recorded for third deferral of two of the five undelivered jackup rigs. The remaining two of the five undelivered jackup rigs will have their scheduled deliveries to Borr deferred to 2025. Recall that KOM and Borr had previously agreed on the deferral of the delivery of these five jackup rigs twice. Borr will pay holding costs and cost cover in respect of the deferred deliveries.

 

+ KOM secured repeat newbuild FPSO contract P-83 worth US$2.8bn from Petrobras, net orderbook rise to ~$11.8bn. The P-83 scheduled for delivery in 1H27, is a repeat order of the P-80 FPSO that KOM secured in August this year. The P-83 and P-80 is a larger FPSO  compared to the P-78, which was awarded in May 2021. The P-83 and P-80 has a larger production capacity of 225,000 barrels of oil per day (bopd) vs. the P-78’s 180,000 bopd.

 

We believe the latest contract win will enhance the proposition of the KOM-SMM merger as the orderbook under KOM will all be subsumed under the new entity – Bayberry.

Keppel Corporation – Tranforming into asset light recurring income business model

 

 

Positives

+ 1H22 net profit below expectations, at 43% of FY22e profit but interim dividend exceeds expectations. Net profit of $498mn (+66% YoY) was slightly under our expectations as Urban Development dragged due to headwinds from China’s property market. Interim dividend of $0.15, came ahead of our expectations of $0.12, which we believe reflects management’s confidence in FY22’s outlook. We revise FY22e dividend to $0.33 from $0.29 with the payout ratio at 55% of earnings unchanged.

 

+ $710mn of assets monetised YTD, ontrack to hit $5bn target. The $710mn of assets monetised YTD brings the cumulative amount announced to $3.6bn since October 2020. Management remains confident of exceeding its $5bn target by end-2023. We expect the conclusion of the proposed O&M transactions, still on track for completion by end-2022, to move the Group past its $5bn target.

 

+ Bolder statement on transformation of Keppel Land. We welcome the management’s bolder statements on its plan forward for its Urban Development business. As part of its asset-light strategy, the Group has set out its plan to accelerate landbank monetisation in China and Vietnam in the next 1-2 years. We believe this can also be done through injections into Keppel-managed funds.

Transformation of Keppel Land into an asset-light urban space solutions provider will accelerate the growth of the Group’s recurring income (40.6% of 1H22 net profit vs. 35% FY19). The move is in line with its asset-light strategy established in Vision 2030. It will also accelerate the growth of the Group’s recurring income closer to our longer-term target of 60% which we have modelled.

 

Negatives

+ Headwinds in China property market weigh on Keppel Land’s China property sales. Keppel Land’s 1H22 China sales fell by ~69%, which is a steeper drop than most of the largest developers in the market, who have seen an average 50% drop (Figure 2). For FY22e, we do not expect any impairments for its China property business as ASPs have remained stable and the cost of its landbanks are also cheap. ASPs have largely held up as most of its projects are located in key cities across China. Its landbank, which have an average age of seven years, is also at a much lower price than the market value today.

Keppel Corporation – Tranformation into an asset light recurring income business model

 

 

The news

Keppel Corporation has entered into definitive agreements with Sembmarine for the proposed combination of its KOM unit and Sembmarine. The proposed combination is based on a 50-50 enterprise value ratio between KOM and Sembmarine. After the deal is completed, Keppel and Sembcorp Marine will own 56% and 44% of the combined entity respectively. Keppel will distribute in-specie 46% of the combined entity shares to its shareholders and retain a 10% stake.

 

In a separate transaction, Keppel will also sell KOM’s legacy rigs and associated receivables to Asset Co and hold a 10% stake. The Group will receive vendor notes and perpetual securities, which have a value of about $3.9bn and $120mn respectively.

 

Keppel will realise about $9.4bn in value comprising $4.9bn which represents a 56% stake in the combined entity; an extraction of $500mn in cash as part of KOM’s pre-combination restructuring; as well as vendor notes, perpetual securities and a 10% stake in Asset Co worth a total of $4.1bn.

 

The two proposed transactions, inter-conditional and being executed concurrently, will be subject to relevant regulatory and shareholder approvals. Keppel expects the deals to be completed by end-2022.

 

Positives

+ Another step toward Group’s transformation to an asset-light recurring income model. The proposed combination of KOM and Sembcorp Marine and the resolution of KOM’s legacy rigs will see Keppel be more streamlined and focused. Importantly, this will continue the Group’s transformation toward an asset-light business model with a bigger proportion from recurring income (FY21: 28.5%).

The implied valuation of KOM at $4.87bn, which is represented as the value attributable to its 56% interest in the combined entity represents a significant upside to our valuation of KOM at  ~$1.5bn (or its NTA of $0.9bn). The upside represented here accounts for KOM’s $5.1bn orderbook, future order wins and margins computed by its independent financial advisor.

 

Post-completion, Keppel’s Energy & Environment segment would comprise mainly renewables, clean energy, decarbonisation and environmental solutions. The Group will then be much more streamlined, focused and aligned to its Vision 2030 plans.

 

+ Improved financial metrics. The proposed transactions, if successful, are expected to be earnings accretive to Keppel for FY21 on a pro forma basis. For illustration, had the proposed transaction been completed on 1 January 2021, the earnings per share for FY21 would have been $0.725 instead of $0.562, excluding the net disposal gain from the proposed transactions.

 

Had the proposed transaction and proposed distribution been completed on 31 Dec 2021, the net gearing would have decreased from 0.68x to 0.63x. Had the proposed transactions and proposed distribution been completed on 31 Dec 2021, the net tangible assets per share would have increased to $5.54 from $5.53.

 

+ $500mn in cash to be re-invested into new growth areas, including potential share of gains with shareholders. Keppel will seek to re-invest the $500mn in cash extracted as part of KOM’s pre-combination restructuring into new growth areas. We believe the Group could re-invest the proceeds into new growth areas such as data centres and clean energy assets.

 

We also believe that management could distribute some of the share of gains to its shareholders.

+ Uncompleted rigs at Asset Co, which will no longer be funded by Keppel carry future potential upside. Under the second agreement signed, Keppel has entered into a definitve agreement with Baluran Limited (Baluran), an indirect wholly-owned subsidiary of ASM Connaught House Fund V, and Kyanite Investment Holdings, an indirect wholly-owned subsidiary of Temasek, for the sale of Keppel O&M’s legacy completed and uncompleted rigs and the receivables associated with certain legacy rigs to a separate Asset Co.

 

Asset Co, which will be independently managed, will maintain, complete and monetise the rigs over time for repayment of the vendor notes and perpetual securities. The external investors of Asset Co will provide capital for completing uncompleted rigs, which would no longer be funded by Keppel. With the improving market conditions, there is confidence on the monetisation of these legacy assets over time. The vendor notes issued to Keppel come with a 5% redemption premium, which allow for the conglomerate to capture future potential upside on these legacy assets.

Outlook

The signing of the definitive agreements is a positive first step, but there are a couple of developments we continue to watch closely – regulatory approvals required for the deal, integration plan of the combined entity, outcome of the remaining 10% combined entity shares and Keppel’s plan for the $500mn in cash.

 

On the regulatory approvals required for the deal, we note that both Keppel and Sembmarine operate in many jurisdictions, and anti-trust and regulatory approvals will require some time to run through. The second item we are watching is the integration plan of the combined entity. We are watching for the detailing of the upside synergies expected to be created through the proposed combination, as well as opportunities for the combined entity in the energy transition as well as the recovery in the O&M business. Thirdly, there is the outcome of the remaining 10% of the combined entity shares which will be deposited into a segregated account for certain identified contingent liabilities.

The account will be terminated no later than 48 months from the completion of the the proposed combination, or as soon as these contingent liabilities have been dismissed or fully resolved. The balance amount in the account will then be returned to Keppel after making payments to the combined entity, if any. Last but not least, we are watching for how the Group will re-invest the proceeds for the $500mn in cash.

 

We will provide updates of these developments as they come along.

Keppel Corporation -1Q22 see drag from Urban Development

 

Positives

+ 1Q22 net profit was higher YoY, with improved performance from all its business segments except Urban Development. In its 1Q22 voluntary business update, Keppel reported improvements in its profits driven by improved performance from its segments. The net profit was not provided in this voluntary business update.

 

Energy & Environment: KOM recorded significantly reduced net loss YoY and was positive on the EBITDA level due to higher levels of activity. Op Co was also profitable for 1Q22 as the Group’s streamling of its operations begins to pay off. In 1Q22, KOM secured new orders worth $76mn. In view of improving conditions, management is confident of substantially monetising KOM’s legacy rigs in the next 3-5 years.

 

Urban Development: Revenue from this segment was below our expectation as sentiment in China has turned cautious after the debt crisis affecting developers. The recent lockdowns have also caused some short-term disruptions to operations in affected cities. Keppel Land sold 540 homes in 1Q22, compared with 1,360 homes sold a year ago, due mainly to the timing of new project launches, a number of which management guided are slated for launch later in 2022.

 

Connectivity: Revenue from M1 increased to $260mn from $254mn driven by its enterprise segment.

Asset Management: Increase driven by new funds raised, as well as acquisition fees for new acquisitions done, such as the deal that Keppel Infrastructure Trust did, namely the Aramco deal.

 

+ Significant progress made on advancing the sale of KOM’s legacy rigs and associated receivables, working toward definitive agreement by 30 April 2022. Keppel had previously announced that it will be transferring its legacy completed and uncompleted rigs and associated receivables to a separate company (Asset Co) that would be majority owned by external investors. This Asset Co transaction and the proposed combination between KOM and SembMarine will be inter-conditional, and they are being pursued concurrently.

 

Should the proposed transaction be successfully completed, external investors will provide capital for completing these uncompleted rigs, which would reduce Keppel’s capital requirement. Keppel’s economic exposure in Asset Co is also expected to be reduced over time, as the rigs or Asset Co are sold or securitised when conditions in the rig chartering market improve.

 

Negatives

- Uncertainty in China market cause drag on property sales. The debt crisis last year along with the recent lockdowns has caused sentiment to weaken in China. With a few property projects slated for launch in the 2H22, we will be watching this closely to gauge the home buyer sentiment.

 

Outlook

With the chapter on Singapore Press Holdings (SPH SP, Non-rated) now closed, we turn our attention to the proposed merger of KOM and Sembmarine (SMM SP, Non-rated). Management is working towards signing definitive agreements by end-April 2022. The outlook of the industry is also improving, underpinned by firmer oil prices. Modern jackup rig utilisation and day rates are expected to improve as oil prices continue to rise. We expect KOM’s legacy rigs to be substantially monetised in the next three to five years on the back of the improving industry outlook. While nothing has been firmed up, we view the developments positively as it provides better clarity on the fate of its O&M unit. With the overhang removed, along with the divestment of its logistics unit, we believe Keppel will be re-rated.

Keppel Corporation – Another delay to potential combination of Keppel O&M and Sembcorp Marine

 

The news

Keppel Corp and Sembcorp Marine announced that while significant progress has been made on advancing the proposed combination, including mutual due diligence, the transaction structure, exchange ratio and other related matters, more time and deliberation will be required to complete due diligence, reach mutual agreement on the transaction terms and finalise definitive legal documentation.

 

Both parties remain committed to continue with exclusive negotiations and work towards a definitive agreement by 30 April 2022.

 

Keppel T&T has entered into an agreement for the divestment of its entire stake in Keppel Logistics to Geodis Internation SAS (GEODIS) for a consideration of approximately $80mn, valuing Keppel Logisitics at enterprise value of $150mn on a cash free debt free basis. This transaction includes Keppel Logisitics’ businesses in Singapore, Malaysia and Australia, as well as UrbanFox.

 

Positives

+ Significant progress made on advancing the sale of KOM’s legacy rigs and associated receivables. Keppel had previously announced that it will be transferring its legacy completed and uncompleted rigs and associated receivables to a separate company (Asset Co) that would be majority owned by external investors. This Asset Co transaction and the proposed combination between KOM and SembMarine will be inter-conditional and are being pursued concurrently.

 

Should the proposed transaction be successfully completed, external investors will provide capital for completing these uncompleted rigs, which would reduce Keppel’s capital requirement. Keppel’s economic exposure in Asset Co is also expected to be reduced over time, as the rigs or Asset Co are sold or securitised when conditions in the rig chartering market improve.

+ Keppel announced divestment of its logistics business. We expect the divestment of Keppel Logistics to improve the Group’s ability to meet its 15% ROE target. For FY21, the Keppel Logistics entities being divested to GEODIS registered a net loss after tax of $5.2mn. The proposed divestment of its non-core business that has been operating at a sub-scale level, is in line with its Vision 2030 plans to simplify and focus its bsuienss as well as to enhance its earnings.

 

We believe that Keppel T&T’s priority will now be to scale up in its focus areas of sustainable data centre solutions and subsea cable systems. The capital unlocked from this transaction will also fund its new growth initiatives.

 

Negatives

- Second delay to potential combination of KOM and Sembcorp Marine. While we are naturally concerned about another delay to the potential combination of the two entities, we note that the current extension to 30 April 2022 is just a month away. We believe that the two entities are working expeditiously to reach a mutual agreement on the transaction terms and are working towards a definitive agreement as quickly as possible.

 

Outlook

With the chapter on Singapore Press Holdings (SPH SP, Non-rated) now closed, we turn our attention to the proposed merger of KOM and Sembmarine (SMM SP, Non-rated). Management is working towards signing definitive agreements by end-April 2022. The outlook of the industry is also improving, underpinned by firmer oil prices. Modern jackup rig utilisation and day rates are expected to improve as oil prices continue to rise. We expect KOM’s legacy rigs to be substantially monetised in the next three to five years on the back of the improving industry outlook. While nothing has been firmed up, we view the developments positively as it provides better clarity on the fate of its O&M unit. With the overhang removed, along with the divestment of its logistics unit, we believe Keppel will be re-rated.

 

Maintain BUY with unchanged SOTP target price of S$7.07

We maintain our BUY recommendation with an unchanged SOTP TP of $7.07. We valued the Group based on the four new segments unveiled during Vision 2030 to better reflect the Group’s reporting segments going forward (Figure 2). For its Energy & Environment business, we valued its O&M division at 0.8x book value. Keppel Infrastructure Holdings is valued at 10x FY22e earnings. For its Urban Development segment, we applied a 40% discount on Keppel Land’s RNAV and 1.5x price to book value of the Sino-Singapore Tianjin Eco-City. In the Connectivity segment, we valued M1 at 9x FY22e earnings. For the Asset Management division, we valued Keppel Capital at 10x FY22e earnings, a slight discount to its peers. We also applied a holding-company discount of 20% to the Group.

Get access to all the latest market news, reports, technical analysis
by signing up for a free account today!