Keppel Ltd: Strategic Moves and Financial Outlook

Keppel Ltd is making significant headway in its strategic objectives, notably gaining control over rigs to expedite their sale. The company estimates, on a full-sale basis, to potentially earn up to S\$4.9 billion for the assets in Rigco, contingent on current market conditions and full control over the rigs. This move aligns with its continuous efforts in asset monetization, which has reached approximately S\$1 billion year-to-date, including the divestment of two data centers to KDC REIT for S\$1.38 billion — Keppel’s share being S\$280 million.

The company’s announcement on November 19, 2024, about gaining control over 13 legacy rigs held by Rigco Holdings, marks a pivotal development. Keppel currently holds a 10% stake, with the remaining 90% owned by Baluran Limited/Kyanite Investment, an indirect subsidiary of Temasek. This acquisition will lead to the reclassification of vendor note receivables as fixed assets, impacting the Profit & Loss statement minimally for now.

The estimated value of these rigs is about US\$3.8 billion (S\$4.9 billion), factoring in charter contracts. With the lack of new build benchmarks in recent years, comparisons were made with Diamond Offshore’s sale of 10 semi-subs and drillships for US\$2.1 billion. Keppel’s estimated market value includes charter day rates fixed between September and November 2024.

Keppel Ltd’s asset monetization strategy includes plans to become a global asset manager, with divestment of data centers bringing it closer to this goal. The company has reiterated its “Add” recommendation, with an SOP-based target price of S\$8.78, up from a previous target of S\$8.28. Catalysts for future growth include further asset monetization and potential increases in dividends per share.

Capitaland Investment: A Strong Investment Prospect

Capitaland Investment is recommended as an “Add” with a target price of S\$4.30. With a market cap of US\$10,468 million, the company’s two-year EPS growth is projected to be 77.9%. The company is expected to provide a recurring ROE of 5.0% and a dividend yield of 4.3% for CY24F. The company’s positioning in integrated global asset management places it among industry leaders with a promising growth trajectory.

Seatrium Ltd: Navigating Market Challenges

Seatrium Ltd is also rated as an “Add” with a target price of S\$2.69. The company holds a market cap of US\$4,840 million with a projected EPS CAGR that remains unlisted. Despite market challenges, Seatrium’s strategic positioning in the Singapore shipbuilding sector shows potential for growth, with a focus on navigating industry-specific hurdles.

Yangzijiang Shipbuilding: A Premium Valuation

Yangzijiang Shipbuilding, classified under Chinese Shipbuilders, is recommended as an “Add” with a target price standing at S\$3.20. The company has a market cap of US\$7,700 million and demonstrates a robust EPS growth of 16.8%. With a dividend yield of 3.5%, Yangzijiang is well-positioned to leverage its premium valuation in the shipbuilding industry.

Korean Shipbuilders: Diverse Market Potential

The analysis also covers several Korean shipbuilders, including Korea Shipbuilding & Offshore, HD Hyundai Mipo, and Samsung Heavy Industries, all recommended as “Add.” These companies demonstrate significant market potential, with HD Hyundai Mipo and Samsung Heavy Industries projecting notable EPS growth rates.

Industrial and Conglomerate Insights

Other notable mentions include CSE Global, SATS Ltd, Sembcorp Industries, ST Engineering, and SIA Engineering. These companies are recommended as “Add,” showcasing diverse growth potentials across industrial and conglomerate sectors. With a focus on revenue growth and strategic positioning, these companies are positioned to capitalize on emerging market opportunities.

Conclusion: Strategic Recommendations and Market Outlook

The report provides comprehensive insights into the financial health and strategic directions of these companies. With Keppel Ltd leading the charge in strategic asset management and monetization, other companies in the report show varied potential across different sectors. The “Add” recommendations highlight growth and investment opportunities in these markets, providing investors with a detailed understanding of emerging trends and strategic directions.