Keppel Corporation - CGS-CIMB Research 2023-05-03: Potential for 15% ROE by 2026?

Keppel Corporation - Potential for 15% ROE by 2026?

Keppel Corp (SGX:BN4) | SGinvestors.ioKeppel Corp (SGX:BN4)
  • We think investors will warm up to Keppel Corporation (SGX:BN4)’s transformation plans to become a global asset manager with the reorganisation of the group into three platforms:
    1. fund management platform,
    2. - Read this at -
    3. operating platform.
  • These platforms span across three key business segments – infrastructure, real estate and connectivity.

What are the differences between Keppel’s current transformation plan and the previous one?

  • See Keppel Corp's announcement dated 03 May 2023 for details of the transformation plan. We think the key differences between Keppel’s new reorganisation plan vs what was communicated previously are:
    1. - Read this at -
    2. steer investors’ perception away from viewing Keppel as a ‘property company’ as there are more than one asset class within the group to recycle capital from.

Can Keppel hit 15% ROE earlier than its 2030 target?

  • We think Keppel’s cumulative asset monetisation target S$10bn-12bn by 2026 (S$4.9bn monetised since 2020) is achievable, and implies a further S$5bn-7bn worth of assets to be divested. Simplistically, an asset monetisation momentum of S$1.25bn-1.75bn p.a. seems feasible, in our view, as Keppel has done S$1.2bn-1.6bn p.a. since 2020.
  • Keppel plans to double its asset under management (AUM) to S$100bn by 2026, and reach S$200bn AUM by 2030. It maintains its 15% ROE target by 2030F; we think it could achieve this by 2026F as Keppel plans to replace lumpy real estate development profits (FY21: S$177m) with income that are more recurring in nature.
  • Keppel’s reorganisation as it grows its AUM could also reap synergy within the group, optimising support functions; Keppel expects this to lead to cost savings of S$60m-70m p.a. by 2026F.

S$10bn valuation for recurring income based on 15x FY23F P/E

  •

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @

LIM Siew Khee CGS-CIMB Research | Izabella TAN CGS-CIMB Research | 2023-05-03

Read also CGS-CIMB's most recent report:
2024-02-01 Keppel - Infrastructure Powering Recurring Income.

Previous report by CGS-CIMB:
2023-11-29 Keppel Corporation - Making Headway Into Europe.

Price targets by other brokers at Keppel Corp Target Prices.

Listing of research reports at Keppel Corp Analyst Reports.

Relevant links:
Keppel Corp Share Price History,
Keppel Corp Announcements,
Keppel Corp Dividends & Corporate Actions,
Keppel Corp News Articles


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