Keppel Corporation - OCBC Investment 2023-07-31: Continues To Unlock Value

• Keppel Corporation (SGX:BN4) reported a net profit of S$3.6b for 1H23, the highest profit on record in the group’s 55-year history. This was significantly higher than the S$498m in 1H22, underpinned by a one-off S$3.3b disposal gain from the divestment of the O&M business.
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Strong balance sheet amidst high interest rate environment

• Amid inflation and a high interest rate environment, the group’s balance sheet remains strong. As at end June 2023, about 65% of Keppel Corp’s borrowings were on fixed rates, with an average interest cost of 3.53% and weighted tenor of about three years. Adjusted net debt to EBITDA was 4.7x.

S$0.15/share cash dividend and special dividend in-specie of Keppel REIT units

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• To commemorate the group’s 55th anniversary, there is also a special dividend in-specie of Keppel REIT (SGX:K71U) units – for every five Keppel Corp shares held, shareholders will receive one Keppel REIT unit. This is a nice surprise to shareholders, and this move also likely illustrates the group’s intentions to develop its asset management business.
• Post distribution, Keppel Corp will remain the largest unitholder of Keppel REIT with an interest of about 37.1%, and we think a lower stake in listed/private funds is generally more optimal.
• Keppel REIT's share price traded at S$0.915 per unit on its closing on 26 July 2023.

Focused on reviving returns and unlocking value

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OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2023-07-31 SGinvestors.io

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