Outperformer so far this year
• Share price at 52-week high (16 Feb close)
• Supported by FY21 results announcement, sizeable dividend and share buyback programme
• Enters into arbitration proceedings with SPH
Share price faring well so far this year – Since the start of the year, the share price of Keppel Corporation (KEP) has appreciated by about 18% (based on the closing price of SGD6.08 on 17 February 2022), significantly outperforming the broader Straits Times Index. One of the main reasons behind this good price performance is the FY21 earnings announcement by KEP, during which the group reported net profit of SGD1.02b for the full year, which is the highest achieved in the past six years since the offshore & marine (O&M) downturn. This marked a sharp reversal from FY20’s net loss of SGD506m. The group’s recurring income grew 33% YoY and contributed SGD292m to the group’s net profit for FY21, anchored by contributions from KEP’s stakes in its REITs & Trust, infrastructure services, as well as asset management.
Sizeable final dividend and share buyback programme – The market was also receptive to the group’s announcement of a sizeable final dividend of SGD0.21/share (which reflected the success of KEP’s asset monetization programme) as well as the SGD500m share buyback programme that allowed the purchase of up to a maximum of 2% of KEP’s issued shares.
Other corporate development updates – We have also been closely monitoring for updates on the proposed merger of KEP’s O&M business with Sembcorp Marine, and understand that talks remain ongoing, with hopes to enter into a definitive agreement by 1Q22. As for proposed acquisition of SPH shares by scheme of arrangement, Keppel Pegasus does not agree with SPH’s attempted purported termination of the Keppel Implementation Agreement and filed a notice of arbitration with the Singapore International Arbitration Centre to commence arbitration proceedings against SPH.
ESG updates
KEP has a superior ESG rating. The group fares well in labour management, health & safety, governance and opportunities in clean tech. Our fair value estimate of SGD7.00 incorporates an ESG premium given the group’s stellar showing on this front. BUY. (Research Team)