Keppel’s S\$1.43 Billion M1 Divestment: What Retail Investors Must Know About Singapore’s Biggest Telco Shake-up in Years

Key Highlights of the Proposed Divestment

• Keppel Ltd. has signed an agreement to sell its 83.9% effective stake in M1 Limited to Simba Telecom for S\$1.43 billion enterprise value.
• Keppel will receive close to S\$1 billion in cash proceeds, with net cumulative cash exceeding S\$700 million after considering total investments, dividends, and divestment proceeds since 1994.
• The deal excludes M1’s high-growth ICT business and certain assets, which Keppel will retain as part of its digital infrastructure strategy.
• The transaction is expected to result in an estimated accounting loss of S\$222 million for Keppel, mainly due to goodwill from its 2019 acquisition of M1.
• Completion is subject to regulatory approvals and restructuring, but does not require Keppel shareholder approval.

Deal Structure and Strategic Rationale

Keppel’s wholly-owned subsidiary Keppel Konnect Pte. Ltd., via its indirect subsidiary Konnectivity Pte. Ltd., has entered a sale and purchase agreement (SPA) with Simba Telecom Pte. Ltd. to sell M1 Limited, excluding its ICT business and certain assets (“Excluded Assets”). This move is part of a broader restructuring to sharpen Keppel’s focus on asset-light, high-growth areas like data centres and subsea cables.

The transaction enterprise value is S\$1.43 billion, representing an attractive EV/EBITDA multiple of 7.3x based on FY2024 EBITDA of S\$195 million (excluding ICT). Keppel will receive approximately S\$1 billion in immediate cash, with the net cumulative cash inflow over S\$700 million after factoring in all prior investments, privatisation costs, and dividends from 1994 to 2025. The Excluded Assets, which Keppel retains, have a carrying value of more than S\$300 million.

What Makes This Transaction Potentially Share Price Sensitive?

• Immediate Cash Proceeds: Keppel is unlocking nearly S\$1 billion in cash, which can be used to invest in new growth opportunities, reduce debt, or reward shareholders. This substantial liquidity event could positively influence Keppel’s share price.
• Shift to Asset-Light Model: By divesting the telco operations but retaining the ICT and digital infrastructure assets, Keppel is positioning itself as a global asset manager and operator focused on higher-growth, higher-margin segments. This strategic shift may be seen favourably by the market.
• Estimated Accounting Loss: Keppel expects an accounting loss of S\$222 million, largely due to the goodwill recognised from its previous acquisition of M1. This one-off hit will affect reported earnings but does not impact cash flow. Retail investors should weigh the long-term strategic benefits against the short-term accounting impact.
• Improved Financial Metrics: The divestment will strengthen Keppel’s balance sheet, reducing net debt to EBITDA from 2.4x to 1.7x, and boost net tangible assets (NTA) per share (from S\$4.72 to S\$5.29 post-transaction, excluding one-off effects). Pro forma earnings per share excluding one-off effects also rise (from 20.8 to 21.3 cents).
• No Shareholder Approval Needed: The transaction is not subject to Keppel shareholder approval, allowing for quicker execution and certainty of deal completion.
• Industry Consolidation: Simba’s acquisition of M1, combined with its existing operations, could create a stronger, more competitive digital-first telco in Singapore, potentially affecting the competitive landscape and consumer offerings.

Transaction Timeline and Conditions

• SPA Signing and Announcement: 11 August 2025
• Regulatory Approvals: Joint application to IMDA (Infocomm Media Development Authority) is required. The deal is contingent on regulatory clearance and completion of the restructuring to carve out the excluded assets.
• Completion: Subject to IMDA’s review process and timeline. No need for Keppel shareholder approval.

Implications for Retail Investors

• Potential for Special Dividend or Share Buybacks: With a large cash inflow, Keppel may reward shareholders, though no specific commitment has been announced. Investors should watch for further updates.
• Short-Term Earnings Impact vs. Long-Term Strategy: The one-off accounting loss will depress short-term earnings but is not a cash loss. The focus on digital infrastructure and asset-light growth could drive higher, more sustainable returns over time.
• Change in Business Mix: Keppel will further reduce its exposure to traditional telco operations. Its retained ICT and digital assets may benefit from structural growth trends in data, cybersecurity, and sustainability.

Pro Forma Financial Effects

Note: The sharp drop in EPS when including the one-off loss is a key risk for investors to note, but the underlying profitability improves when the one-off is excluded.

Final Takeaways

• This is a landmark transaction for Keppel, representing a major pivot towards asset-light, higher-growth digital infrastructure segments.
• The immediate cash windfall and improved balance sheet strength are positives, but the one-off accounting loss may temporarily weigh on reported earnings.
• Retail investors should monitor subsequent announcements for any potential special dividends, share buyback programmes, or reinvestment plans stemming from the divestment proceeds.
• The new Simba-M1 entity could shake up Singapore’s telco industry, while Keppel is set to become a purer play on the digital economy.

Disclaimer

This article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. Investors should conduct their own research or consult a financial adviser before making investment decisions. The author and publisher are not responsible for any losses arising from reliance on the information provided herein.

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