Significant Number Of Acquisitions In 2022 Positions KEP For The Future
KEP, 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. Target price: S$10.11.
WHAT’S NEW
• Putting in place the foundations for the next stage of growth. Thus far in 2022, Keppel (KEP) 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. These are tabled overleaf and we calculate the total growth capex involved at more than S$3.2b at either the KEP 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 ytd were the onshore and offshore wind power acquisitions in Europe and the waste management business in South Korea, where KEP’s 18%-owned subsidiary Keppel Infrastructure Trust (KIT) has taken key positions in.
• Keppel Infrastructure Trust (KIT SP, Not Rated) – 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, KIT as a business trust appears to have strong DPU growth momentum over the next 2-3 years. Note that KIT’s 1H22 results were strong with 2.7% yoy DPU growth and 10% yoy EBITDA increase. One of KIT’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.
• Share price has been well-supported by its share buyback programme. KEP 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.
