Analysts are divided on Keppel Corp following Temasek Holdings’ withdrawal of its partial offer of a 30.55% stake in the conglomerate.
On one hand, DBS Group Research has downgraded Keppel to a “hold” rating from “buy” and reduced its target to $5.50 from $6.40 previously.
On the other hand, CGS-CIMB Research has maintained its “add” recommendation with an unchanged target price of $6.46.
On Aug 10, Temasek invoked the material adverse changer (MAC) pre-condition, and thus, will not proceed with its partial offer for Keppel.
This was in response to Keppel’s net loss of $699 million in 2Q FY20, which was considered a breach of one of the MAC pre-conditions.
“While we remain sanguine on Keppel’s longer-term prospects, near term upside could be capped by operational headwinds,” DBS analyst Ho Pei Hwa writes in a note dated Aug 11.
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“Temasek’s withdrawal of the partial offer removes an imminent catalyst,” she adds.
However, CGS-CIMB foresees a 2H FY20 earnings recovery and stronger gains from asset recycling as catalysts ahead.
“Add only after the share price shock subsides,” CGS-CIMB head of research Lim Siew Khee writes in an Aug 10 report.
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According to DBS, Keppel is trading at 0.9 times book value, which is about one standard deviation below its mean average trading price.
It notes that a further rerating requires more evidence of a macro turnaround and return on equity enhancement towards the group’s target of 15%.
As at 2.44pm, Keppel slid 59 cents or 10.9% at $4.81 with 25.7 million shares changed hands.
