DBS Group Research has kept its "buy" call and $9 target price on Keppel after its latest divestment, with expectations of further monetisation moves of its assets ahead.
On May 10, Keppel announced it has sold its 23.91% stake in Dyna-Mac Holdings NO4 for $100 million, or 40 cents per share, which is a 11% premium over the latter's last market price.
The buyer is Korea's shipbuilder Hanwha Group, which presumably has more synergy with Dyna-Mac, which builds topside modules for rigs.
Keppel's investment in Dyna-Mac stemmed from 2011, when its offshore and marine unit bought $87.5 million worth of new shares at 35 cents each.
When Keppel Offshore & Marine was merged with Sembcorp Marine to form Seatrium last Feb, the Dyna-Mac shares were transferred to Keppel at 16 cents each.
With the offshore and marine upcycle, the carrying value of the Dyna-Mac shares was revised to $70 million, or 28 cents each, at the end of FY2023.
According to DBS in its May 10 note, the divestment gains are not expected to impact Keppel's P&L as Dyna-Mac is an investment carried at fair value through other comprehensive income. Nevertheless, the capital recycling transaction is positive from cash flow perspective.
Besides Dyna-Mac other offshore and marine assets transferred to Keppel, to be divested at the right opportunity, included a 49.92% stake in Floatel carried at $280 million; and "stranded" rigs valued at $4 billion, which has been 90% divested.
"Current buoyant charter markets have improved the operating income for these assets and bode well for asset sale opportunities," observes DBS.
"In addition, based on media reports, Keppel is also reportedly back on the negotiating table with Starhub on the potential merger of Starhub-M1, which we believe should harness revenue and cost synergies," adds DBS.
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"These are in line with Keppel’s strategy to be asset-light and become a global asset manager," says DBS.
Keppel shares closed May 10 at $6.73 up 1.66% for the day but down 4.81% year to date.
