Keppel Corp

UOBKayhian on 26 Jan 2015

FY15F PE (x): 9.7
 FY16F PE (x): 10.2

Keppel Land privatisation. Keppel Corp (Keppel) has made a cash offer to privatise Keppel Land (KepLand) with a 2-tier approach: a) Base offer price of S$4.38/share b) Higher offer price of S$4.60/share, to be paid if Keppel is entitled to exercise its rights of the compulsory acquisition (with 90% shares held by the offeror). Our take on the deal. The offer prices are fair and relatively in line with our target price of S$4.30 (pegged at 20% discount to our RNAV of S$5.37) for KepLand. The base offer price of S$4.38 (20% upside to last done of S$3.65) is at KepLand’s P/B of 0.88x and an 18.4% discount to KepLand’s RNAV of S$5.37. The higher offer price of S$4.60 (26% upside to last done of S$3.65) is at a P/B of 0.93x and a 14.3% discount to RNAV of S$5.37. The offer prices are relatively in line with the target price of S$4.30 that we have ascribed to KepLand in our SOTP valuation for Keppel. Maintain HOLD and our target price of S$8.80, which values KepLand at S$4.30 and Keppel’s O&M business at a 2016F PE of 9.5x. Amid the low oil prices, Sembcorp Industries (BUY/target: S$5.20) – with half of its earnings from its relatively defensive utilities business - is the most defensive large-cap stock in the Singapore offshore & marine space.