Date: 02 October 2024
Broker: Lim & Tan Securities Pte Ltd

Award of 20-Year Contract for Centralised Cooling Systems

Keppel Ltd has been awarded a 20-year contract by the Housing & Development Board (HDB) to design, build, own, and operate Centralised Cooling Systems (CCS) at three upcoming Build-to-Order (BTO) projects in Tengah. These projects include Brickland Weave, Plantation Edge I & II, and Plantation Verge, and the system will serve approximately 3,500 households. This marks a significant partnership between Keppel and HDB to enhance sustainable living solutions for Singaporeans.

Strategic Importance of CCS in Tengah

Tengah is Singapore’s first and largest smart and sustainable HDB town. The Centralised Cooling System will offer energy-efficient solutions compared to conventional air-conditioning units by aggregating cooling demand and delivering it through a centralised chilled water system. This move is part of Singapore’s push towards greener, more sustainable living environments.

Keppel’s Leadership in Cooling Services

Keppel’s Infrastructure Division CEO, Ms. Cindy Lim, highlighted the company’s long-standing expertise in providing cooling services. Keppel has over two decades of experience servicing business parks, commercial offices, hotels, malls, wafer fabs, and data centers. This expertise positions Keppel as a key player in delivering modern cooling solutions to homeowners in the Tengah precincts. The CCS at the three BTO projects will be connected to Keppel’s Operations Nerve Centre (ONC) for real-time performance monitoring and remote control.

Expanding Cooling Services Across the Region

As the pioneer district cooling service provider in Singapore, Keppel has a cooling portfolio exceeding 260,000 refrigeration tonnes in the region. In 2023, Keppel was awarded a contract by Singapore’s Urban Redevelopment Authority to design, build, own, and operate a large-scale district cooling plant for the Jurong Lake District. Additionally, Keppel provides cooling services to flagship developments for CapitaLand and Perennial Holdings in Singapore and China, as well as critical facilities such as Micron’s semiconductor fabrication plants.

Financial Impact

Although the contract will not have a material impact on Keppel Ltd’s earnings per share and net tangible asset per share for the current financial year, the contract underscores the company’s strategic role in Singapore’s construction sector and its leadership in sustainable development. Keppel Ltd’s efforts in this area align with global trends, helping attract Environment, Social, and Governance (ESG)-focused funds.

Valuation and Market Performance

Keppel Ltd has a market capitalization of S$12.0 billion and trades at 14.4x forward price-to-earnings (PE) and 1.1x price-to-book (PB). The stock also offers a dividend yield of 5.1%. The consensus target price for Keppel Ltd stands at S$7.74, representing a potential 16.6% upside from its current share price of S$6.64. The company continues to receive an “Accumulate” rating from Lim & Tan Securities due to its role in supporting Singapore’s construction sector and leading the transition to sustainable energy solutions.