CGS-CIMB Research believes that Keppel Corporation’s recent divestment and restructuring gains could alleviate concerns of potential impairment on its investment in KrisEnergy.
Analyst Lim Siew Khee has kept her ‘add’ rating for Keppel Corporation unchanged with her target price maintained at $6.40 in a May 3 research note.
Keppel Corporation recently announced its joint venture with subsidiaries of Sino-Ocean Group Holding to jointly develop eight plots of land in the eastern part of Tianjin Binhai New Area.
The joint venture will see Keppel Corporation reducing its stake in subsidiary Tianjin Fushi from 100% to 49%, with a $100 million gain to be recognised following completion of the transaction, expected in December.
In addition, Lim expects Keppel Corporation to recognise a further gain of $187 million pursuant to the restructuring of Floatel, which she expects will complete in the 2QFY2021 ending June.
SEE:Keppel Corporation enters into JV with Sino Ocean Group to develop the eastern area of Tianjin, China
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Overall, Lim estimates gains totalling $447 million for Keppel Corporation (including the Tianjin Fushi deal and Floatel restructuring) arising from its divestments and other corporate actions which will be recognised in FY2021.
She believes the gains will help offset concerns on the potential impairment exposure to KrisEnergy. The concerns follow KrisEnergy’s recent announcement that output from its Apsara 1A oilfield off the coast of Cambodia will be well below estimates, thus posing a risk to KrisEnergy’s restructuring plans.
Lim notes that Keppel Corporation is still assessing the financial impact that could arise from its KrisEnergy exposure. The carrying value of its investment in KrisEnergy stands at $423 million.
As at 3.53pm, shares in Keppel Corporation are 6 cents or 1.13% lower at $5.27.
