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:
fund management platform,
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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:
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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
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Above is the excerpt from research report by CGS-CIMB. Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
