Potential O&M merger with SembMarine & divestment to drive company re-rating


 Group takes another step toward final resolution for Keppel O&M.

 Keppel to potentially receive up to S$500mn for its O&M legacy assets, which will be monetised over time.

 Proposed transactions, if successful, will allow investors to benefit from merged entity’s revenue and cost synergies.

 Maintain BUY with higher SOTP TP of S$6.20 from S$6.12 as we believe the better clarity on its O&M division should narrow the O&M divisions discount to its book value, with a 10% holding-company discount. Our TP translate to about 1.0x FY21e book value, a slight discount to its 5-year average of 1.05x. Catalysts expected from contract wins and a successful resolution to its O&M unit.