[ad_1]
Wed, Sep 30, 2020 – 11:43 am
DBS Group Research has upgraded Keppel Corp to “buy” from “hold” following its recent price correction and as the strategic review of its offshore and marine (O&M) arm “will shed some light at the end of the tunnel.”
Shares of Keppel rose 6.1 percent or 0.26 Singapore dollars to 4.56 Singapore dollars as of 11:07 a.m. on Wednesday. This comes after the conglomerate said Tuesday that it has identified some S $ 17.5 billion in assets that can be monetized over time and that it will begin a strategic review of its O&M business.
DBS has a 12-month price target of S $ 5.50 on Keppel. This represents a 28 percent increase from the end of September 29 of S $ 4.30.
The stock has corrected about 20 percent after the partial withdrawal of Temasek’s offering, dragging its valuation to a low of around 0.73 time price-to-book, or two standard deviations below its five-year average, wrote DBS analyst Ho Pei Hwa in a report. research note Wednesday.
He added that Keppel’s reassertion of capital recycling to unlock S $ 3-5 billion of identified assets over the next three years, along with the launch of a strategic review of its O&M business, should restore confidence among investors.
“After the kitchen plunged in the first half of 20, we believe that the worst is already behind Keppel, the operational improvements ahead should drive the valuation rate to one standard deviation below the average, with a performance on equity that will slowly increase to an estimated 7 to 8 percent next year, “said Ms. Ho.
DBS also believes that improving ownership is another catalyst for the counter.
On the other hand, CGS-CIMB has kept its “add” option on the counter, with an unchanged price target of S $ 6.46.
CGS-CIMB analyst Lim Siew Khee noted that Keppel’s O&M review could lead to it downsizing its operations to focus on renewable energy. Inorganic options, meanwhile, include mergers and divestitures, and the brokerage said it is not ruling out a merger of Keppel’s O&M business with Sembcorp Marine.
The brokerage also expects to see accelerated efforts at Keppel selling its land bank or commercial buildings as part of its three-year plan to unlock assets.
“We believe that the monetization plans could include the sale of land and the injection of Singapore commercial properties into real estate investment trusts.
“Although this has been an integral part of their previous asset recycling strategy, this time setting a strict goal of S $ 3-5 billion makes a difference,” said Ms Lim.
[ad_2]
