Keppel Ltd: Eyeing Large Monetisation Opportunities

Keppel Ltd (KEP), a Singapore-based conglomerate, has demonstrated resilience and strategic agility in its operations. The company reported a net profit of S\$832 million for FY24, aligning closely with CGS International and Bloomberg consensus estimates. This performance was driven by revaluation gains in the Real Estate and Connectivity sectors. Including legacy offshore and marine (O&M) assets and discontinued profits, the overall FY24 net profit stood at S\$940 million.

Strategic Focus on Asset Monetisation

Keppel’s asset monetisation efforts have gathered pace, with S\$1.5 billion in monetisation achieved in 2024 alone. This brings its cumulative divestments since October 2020 to S\$7 billion, with a target of S\$10-12 billion by 2026. Notable opportunities include the divestment of M1’s consumer business (estimated to yield S\$660-780 million) and rigs within the asset co portfolio, valued at approximately US\$800 million. These efforts could pave the way for special dividends in the coming years.

Connectivity and Real Estate Driving Growth

Keppel’s Connectivity division is poised for significant growth in FY25, with profits expected to rise by 14% year-on-year to S\$235 million. This growth will be bolstered by the Bifrost Cable System, set to commence operations in 2H25, contributing S\$22 million in FY25 and higher figures in subsequent years. Meanwhile, the Real Estate segment reported a remarkable net profit of S\$177 million in 2H24, driven by revaluation gains from assets such as Keppel South Central Singapore and Saigon Centre.

Upgraded Target Price

CGS International has raised Keppel’s target price to S\$9.28, reflecting a 38.9% upside. The recommendation for Keppel Ltd remains “Add,” with optimism around its transition to an asset-light global asset manager. The firm’s managed funds grew 2.4x since 2020, reaching S\$88 billion by the end of 2024.

Capitaland Investment: Sustaining Strong Growth Momentum

Capitaland Investment (CLI) is another key player in the asset management industry. The company has demonstrated robust growth, with a projected 18.8% compound annual growth rate (CAGR) in earnings per share (EPS) for FY24-26. Its recurring return on equity (ROE) is estimated at 6.5% for FY24, slightly higher than Keppel’s.

Strategic Positioning

CLI’s focus on integrated global asset management has positioned it well for sustained growth. With a target price of S\$4.30 and an “Add” recommendation, CLI continues to attract investor confidence. The company’s dividend yield aligns with Keppel’s at 4.9%, making it a compelling choice for income-focused investors.

Seatrium Ltd: High Growth Potential in Shipbuilding

Seatrium Ltd (STM) has showcased immense growth potential, particularly in the shipbuilding sector. With a projected EPS CAGR of 49.6% for FY24-26, STM stands out among its peers. The company is trading at a forward P/E of 15.5x for FY25, with an “Add” recommendation and a target price of S\$2.90.

Key Drivers

Seatrium’s exceptional growth is attributed to its strategic positioning in the shipbuilding industry, which is experiencing a resurgence globally. Its ROE for FY24 is estimated at 4.1%, slightly lower than its peers, but its growth trajectory remains impressive.

Yangzijiang Shipbuilding: Solid Fundamentals

Yangzijiang Shipbuilding (YZJSGD) has maintained a strong foothold in the Chinese shipbuilding market. The company is trading at an attractive forward P/E of 10.3x for FY25, with a dividend yield of 3%. Its ROE is significantly higher than its peers at 22.2%, underscoring its operational efficiency.

Recommendation

With a target price of S\$3.62, CGS International has issued an “Add” recommendation for Yangzijiang Shipbuilding, citing its robust fundamentals and healthy dividend yield.

Korea Shipbuilding & Offshore: A Leader in Innovation

Korea Shipbuilding & Offshore (009540 KS) has emerged as a leader in the shipbuilding sector, driven by innovation and high growth potential. The company is trading at a forward P/E of 6.5x for FY25, with an extraordinary EPS CAGR of 84.9% for FY24-26. Its ROE is estimated at 13.8%, reflecting its strong financial performance.

Recommendation

CGS International has issued an “Add” recommendation for Korea Shipbuilding & Offshore, with a target price of KRW 232,000. The company’s strategic focus on advanced shipbuilding technologies positions it for long-term success.

ST Engineering: A Strong Contender in the Industrial Sector

ST Engineering (STE) is a key player in the industrial and conglomerate sector. With a forward P/E of 17.2x for FY25 and a dividend yield of 3.3%, STE offers a balanced mix of growth and income. The company’s recurring ROE is estimated at 28.6% for FY24, significantly higher than its peers.

Recommendation

CGS International has given an “Add” recommendation for ST Engineering, with a target price of S\$5.30, citing its strong financial metrics and growth potential.

SIA Engineering: Consistent Performance

SIA Engineering (SIE) has maintained consistent performance, with a forward P/E of 15.7x for FY25 and a dividend yield of 4.2%. The company’s recurring ROE is estimated at 8.6% for FY24, reflecting its stable operational efficiency.

Recommendation

With a target price of S\$2.65, CGS International has issued an “Add” recommendation for SIA Engineering, highlighting its steady performance in a competitive market.