- RE-ITERATE BUY Entry – 6.75 Target – 7.23 Stop Loss – 6.54
- Keppel Corporation is a Singaporean conglomerate headquartered in Keppel Bay Tower, HarbourFront. The company consists of several affiliated businesses that specialise in offshore & marine, property, infrastructure and asset management businesses.
- Big powerhouse. Yesterday, the proposed merger of Keppel Offshore & Marine (O&M) with Sembmarine was announced. The combination would result in one of the world’s largest offshore energy players worth $8.7 billion. The merger would help Keppel realise about $9.4 billion in value. This includes $500 million in cash from Keppel O&M to settle outstanding interest and partial redemption of certain perpetual securities previously issued to Keppel. It also includes $4.05 billion from the sale of Keppel O&M’s legacy rigs and associated receivables to a separate company that will be 90% owned by other investors, with Keppel holding a 10% stake. Keppel will also get a bigger share at 56% of the new entity arising from the merger, while Sembmarine shareholders will own 44%.
- 1Q22 results. Revenue was 9% higher at S$2.1bn for 1Q22, underpinned mainly by Energy & Environment, while net profit in 1Q22 was higher YoY, with improved performance in Energy & Environment, Connectivity and Asset Management. All key business units apart from Keppel O&M were profitable, however, Keppel O&M significantly reduced net loss and was EBITDA positive.
- Improving oil prices to bolster the O&M segment. With improving conditions in the offshore & marine sector, underpinned by the improving oil price and the increasing utilisation rates and day rates of offshore drilling rigs, Keppel O&M’s legacy rigs can be substantially monetized in the next 3-5 years. Energy markets worldwide are dealing with massive disruptions to supply following Russia’s invasion of Ukraine and subsequent sanctions slapped on Moscow by the United States and its allies. Despite the volatility in oil prices in the first quarter of 2022, WTI and Brent Crude oil prices are still trading above pre-invasion prices and have closed around the US$100/bbl mark yesterday.
- Positive consensus estimates. Currently, Keppel Corp has a consensus estimate of 10 BUYS, 1 HOLD and 1 SELL, with a 12M target price of S$7.30.
(Source: Bloomberg)